What Type of Insurance Do I Need if I Modify My Car?

Modified car insurance, or custom parts and equipment insurance (CPE), provides coverage for aftermarket parts and equipment installed in your vehicle. Without the appropriate coverage, modifications installed in your vehicle might not be protected and could even invalidate your insurance.

Learn how modifications affect your car insurance rates and how you can get the right coverage for your modified vehicle.

Key Takeaways If you want modified parts like turbochargers, strut bars and suspension enhancements to be covered, you will likely need to buy modified car insurance. CPE coverage can be purchased through several providers such as Elephant, Esurance, Farmers and others. Base policies through Elephant, for example, offer $1,000 in CPE coverage while Esurance’s CPE endorsement can have limits of up to $4,000. Having a vehicle with a nitrous system or lift kit will most likely cause your insurance rates to go up. Certain modifications, such as those that enhance safety while driving, can provide a discount on your insurance.

What Is Modified Car Insurance?

Modified car insurance is a distinct insurance type that provides protection for aftermarket parts and equipment installed in your vehicle. CPE insurance can take the shape of an endorsement added to your plan or a completely separate policy.

Aftermarket parts are different from original equipment manufacturer (OEM) parts, which are parts made by the vehicle's manufacturer or a manufacturer-approved supplier and are the parts already on the vehicle when you buy it new.

Does My Car Insurance Policy Cover Modifications?

Standard car insurance policies don’t typically cover a modified vehicle and on the off-chance a carrier does, it’s often with low limits that could be insufficient for your car or truck. If you have invested a considerable amount of money into modifying your car, you will likely need to purchase modified car insurance.

How Does Modified Car Insurance Work?

If you modify your car and it is totaled in an accident, you will only be reimbursed for the actual cash value of your vehicle, excluding the value of whatever modifications you made. That means if you added $3,000 worth of upgrades and modifications to your car but did not purchase modified car insurance, you will not get reimbursement for the additional $3,000.

The core principle behind CPE insurance is to cover the additional value and risks associated with modifications made to your car.

However, to qualify for modified car insurance, you will typically need to have a policy that includes physical damage coverage. If you’re still paying off your car, you’ll likely already have collision and comprehensive coverage so this shouldn’t be an issue.

What Types of Car Modifications Are There?

There are several types of car modifications installed to improve the performance of your car or lend a certain aesthetic. A few examples of common car mods include:

Strut bars	Chrome bumpers, special lights and custom wheels
In-vehicle Wi-Fi	Dual exhaust
Lift kit	Anti-roll or anti-sway bars
Truck bed liner	Custom grilles
Carpeting	Upgraded suspension
Winches	Sport seats
Turbochargers	Roof rack
Tow bar	Window tint
Custom paint jobs and interior	Enhanced stereo systems
Nitrous oxide	Enhanced security systems
Backup camera

What Types of Insurance Cover Modified Cars?

Types of insurance that would help ensure you receive full reimbursement for your car's value include a separate CPE policy or a CPE endorsement on your auto insurance plan. This protection enhances your basic car policy by protecting custom features and the value of aftermarket components up to a specified limit.

Another choice is stated amount coverage, which may be a good option if your vehicle was repaired with cheaper aftermarket parts and you want to secure a lower premium. After you pay your deductible, it reimburses the actual cash value of your car or however much you claim the value of your vehicle to be, whichever is less.

For those with classic or collectible cars, where regular coverage limits are insufficient, seeking an insurer specializing in classic car insurance is advisable. There will often be stipulations tagged onto this coverage, such as a maximum number of miles that can be driven per year as well as garaging requirements.

What Types of Modifications Aren’t Covered?

Certain modifications prohibited by your state’s laws won’t be covered by your insurance. For instance, California allows for lift kits to be used in vehicles but limits the lift height to a maximum of five inches.^[1] If your vehicle exceeds this limitation, your insurance as a whole could be invalid if there is an accident. Texas, on the other hand, does not have lift limits, so your insurance may cover damage to your lift system if you have the right coverage.^[2]

In addition, states do have the right to prohibit the use of certain modifications. For example, in Maine, installing a nitrous kit in your car is illegal.^[3] Again, your car insurance may be completely void if there is an accident, especially if the nitrous system in your vehicle contributed to the damage.

Which Insurance Companies Offer Modified Car Insurance?

There are several providers offering insurance for modified cars, including:

• Elephant: A standard policy already covers $1,000 for modifications but you will need to buy a CPE endorsement for additional coverage.^[4]
• Esurance: Offers CPE insurance with a limit of up to $4,000.^[5]
• Farmers: To buy a CPE endorsement, the vehicle must be up to 10 years old and the driver must buy collision and comprehensive coverage.^[6]
• Goosehead Insurance: Coverage comes in the form of a CPE endorsement.^[7]
• American National: CPE coverage up to $2,000 is included if your policy has collision and comprehensive coverage.^[8]
• Hagerty: Provides $750 in CPE coverage with additional coverage options available.^[9]
• J.C. Taylor: Offers CPE insurance with a $250 deductible in most states.^[10]

Why Would I Need Modified Car Insurance?

If you want to be appropriately reimbursed in the event of an accident, modified car insurance is critical. If you fail to update the insurer of your car’s modifications and buy the appropriate coverage, you won’t be covered and your insurer may invalidate your policy for failing to provide up-to-date information.

Do Modified Cars Have Higher Insurance Rates?

Insurance on modified vehicles will generally cost more than the same vehicle without modifications since you’ll need to buy additional coverage. It should also be noted that custom parts can be expensive and can increase the likelihood of theft. The higher the likelihood of theft, the more likely your insurance company will have to pay for a replacement vehicle.

Insurers may also consider drivers of cars with certain modifications, such as nitrous systems, to be high-risk drivers and more likely to file a claim. Naturally, high-risk drivers would be charged higher rates so insurance companies can offset this risk.

There is also an inherent risk when it comes to certain modifications. For example, lifted vehicles have a higher center of gravity, which makes them unstable at high speeds. Car insurance rates go up whenever there’s a higher likelihood of an accident happening.

Can a Car Modification Lead to a Policy Discount?

Adding safety features to your vehicle might lead to discounts on your insurance. For instance, installing security alarms and systems, adding front and rear cameras with parking sensors or equipping your car with adaptive headlights and daytime running lights are modifications that could potentially lower your auto insurance costs.

How Do I Get Car Modification Insurance?

When looking for insurance, it's wise to compare at least three to five different quotes from various providers. These car insurance companies will need details like your vehicle's year, make and model, your driving record, the various modifications your vehicle has and information about any additional drivers on your policy. This process can often be time-consuming and repetitive.

That's where a service like SmartFinancial comes in handy. You only need to complete one questionnaire about what you need and your budget. SmartFinancial then does the heavy lifting, quickly matching you with an agent who can help you find a car insurance plan that suits your specific needs. Start now by entering your zip code below to get a FREE insurance quote.