Everyone has an opinion of what the best modification to your vehicle is. The popular ones are usually tires, brakes, and suspension. They’re probably right – but the most important aspect of upgrading your car isn’t actually a modification at all. The most important, yet often forgotten step when modifying your car is:
You guessed it. Car insurance. This topic might be boring, but it’s a big deal so bear with me.
For those of you that haven’t fallen asleep yet, we need to have a talk about this. I know it’s nowhere near as fun or exciting as discussing which upgrades or modifications will give you the best results. But when you take a moment to consider the consequences of getting this wrong, you might find yourself a bit more interested.
How car insurance works:
Now I won’t claim to be a lawyer or insurance expert because I’m not. Unfortunately, I’ve had to study this topic a bit and I have a general understanding of how things work.
Here in Ontario, we have what’s known as “No Fault” insurance. All this really means is that in the event of a claim, we are paid by our own insurance company. If you’re in an accident with another car, instead of your insurance company going after the other person’s company (or the person themselves) for compensation, they just pay you directly. Everyone stays on their own side. This is especially helpful when you’re dealing with an uninsured motorist.
As car enthusiasts, sometimes it’s Us vs. Them
Let’s take a step back and look at the insurance industry as a whole. What exactly is their business model? Well, they basically run a subscription service that sells you protection in the small chance that you get into trouble. They charge us money for protection in the hopes that they never actually have to pay out. Kind of sounds like those guys from the “neighborhood”, huh?
When they do need to protect us, they’ll take any way out of fulfilling their obligations that they can. They play this game in order to stay as profitable as possible. As a result, an insurance company is never going to offer you a favor. They will only do what the law forces them to do (and sometimes even less).
Insurance companies aren’t the biggest fans of us car guys. In a way, I don’t blame them. It’s really a case of the few bad apples spoiling the whole bunch. We’ve all seen the young kids acting recklessly in modified cars. We know that we aren’t all the same but unfortunately, the insurance companies don’t. With this in mind, it’s extra important for us to cover our own backs because we can’t trust anyone else to.
So where am I going with this?
I believe the most commonly forgotten step when modifying your car is to notify your insurance company of the changes. Many people will think this is the same as tattling on yourself and will only get you in trouble. I won’t lie, it might. Some companies just don’t like to deal with modified vehicles, so you’ll need to shop for one that will. But I can assure you, the consequences of getting caught will be far, far worse.
You might think that as long as the insurance company doesn’t find out about your modifications, you’re safe. There are two things wrong with this train of thought:
- If they ever do find out, it will already be too late.
- You’re essentially driving around uninsured.
You see, there’s much more to it than having your insurance company raise your premiums. It’s your responsibility to make sure all the information they have about you and your vehicle are correct at all times. What they don’t know WILL hurt you. All they have to do is deny your claim, and surprise, you no longer have insurance coverage. This is an even bigger deal than you might think.
Why do they care so much about modifications?
It all comes down to different levels of risk. They don’t like taking risks unless they’re paid extra for it. Sort of like how a bank will only lend you money at a higher interest rate if they think there’s a good chance you’re not going to pay them back. In this case, even though I believe they’re completely wrong, they see modified vehicles as being more likely to cause accidents.
“So, the worst case is my claim is denied and I have to pay to fix my car myself. Not the end of the world!”
Wrong.
The potential consequences are much worse than that. Take a look at your insurance policy. See all of those different things that they cover you for? That’s a lot of zeros. If you’re in a major accident and they have a legit reason to deny your coverage (and failure to disclose modifications is an EASY one) then you may no longer be covered for any of that.
All of your medical expenses will no longer be covered. Any idea what a ride in an air ambulance costs?! Was any public property damaged as a result of your accident? You could get the bill for fixing it. You’d be amazed what it costs to replace a light post or guardrail.
If you give your insurance company a way out, they WILL take it.
I know of one specific story where a car was rear ended by a pickup truck. It was completely the other driver’s fault as he was stopped at the time. Open and shut case. Yet when the insurance adjuster came to look at the car, he found a supercharger under the hood. The car was otherwise stock and the damage was 100% on the rear end. The supercharger had NOTHING to do with the accident (remember, his car was stopped at the time!). His claim was denied.
If you think you can get away with being extra careful, think again. For example, I’m the most careful and paranoid person I know when it comes to driving my MR2 around town. Whenever it leaves my garage, I’m either driving it or it’s parked in my line of sight.
I drive it much like a motorcycle in terms of staying visible and avoiding possible accidents. I don’t want anything to happen to it, because money alone can’t replace it – it’s the only one in the world exactly like it. I’m cautious to the point of being crazy, and guess what?
It’s been broken into once, and rear ended twice.
Fortunately, the thieves only stole/damaged the stereo, and the rear end impacts didn’t actually cause any damage. I’ve been lucky. All I’m saying is, if it can happen to me, it can happen to anyone.
What modifications need to be reported?
Not everything will be a liability risk to your insurance company. It’s best to find out from your specific company what they care about, but I’ll give you a basic guideline.
As far as replacement costs go, they’re probably only going to cover what you told them about ahead of time. If you want any chance of having them pay for your aftermarket stereo or wheels, you’ll need to let them know. Failure to tell them about these shouldn’t affect your liability coverage though (again, don’t quote me).
Liability risks are a bit more specific. The easiest way to look at it is: anything that makes your car faster or changes the way it handles needs to be shared. If you went to a local exhaust shop to replace your muffler instead of going to the dealership, the insurance company isn’t going to care about that. They won’t care if you replaced an axle with one from a parts store either.
They care about the big stuff. Turbo/superchargers, big brakes, drastically changed the suspension, alternate fuel systems etc. There’s a chance you may tell them about some of these and they won’t even care. But at least you know you’re covered.
All it takes is a simple phone call to your broker or agent to let them know about your modifications. Yes, it’s possible that your premiums will go up, or they may drop you altogether. Even if you’re forced to find a new company to deal with, at least you know that there’s no chance of you losing your car, house and/or business. In some cases, your call will be answered with a “great, thanks for letting us know!” and that’ll be the end of it!
If your car is older than 15 years old and you have a separate daily driver, you should qualify for Classic Car Insurance.
This is an absolute game changer. The companies that deal with this understand that most classic cars and hot rods are modified in some way. They also know that they’re well cared for and not daily driven. This is as close to an insurance company being on the car guy’s side as you’re going to get.
Aside from covering all of your legal mods, classic car insurance has another great benefit: an agreed value policy. Basically what this means is that you’ve provided the company with an appraisal stating what your car is worth in today’s market, and they agree to honor that if they need to replace it.
In the case of my MR2, I had it insured as a regular car for a short period of time after I bought it. Its replacement value in their book was around $3,000. All it took was an appraisal and a change of the policy and it had a replacement value of $18,500. Nothing changed on the car, they were just told by an authorized appraiser what it was truly worth.
Some classic car insurance companies will have different restrictions on modifications, mileage, and places it can be driven. Make sure you shop around to get a policy that suits you. You’ll be amazed at how cheap some of these can be!
If you’ve made it this far through the post, good job. Before you check out a more interesting article to wake yourself up (like this post on the story of my Harley Davidson!), I’ll quickly summarize what you have to lose whether you choose to tell your insurance company about your modifications or not.
The downsides of declaring your modifications:
– your premiums may increase
– the company could drop you altogether
The downsides of NOT declaring your modifications:
– no payment to replace or fix your vehicle if it’s crashed or stolen
– you’ll pay out of pocket for any medical costs in an accident
– no coverage for replacing damaged public property
– a denied claim could go on your insurance record
– no protection against potential lawsuits
Remember there’s more at stake than simply not having your stolen stereo replaced. You could be on the hook for some massive expenses if you don’t take care of this properly. Nobody wants to pay extra, but a small cost to avoid a huge one is always worth looking into.
