Modified car insurance
Had some work done on your car? Get specialist car insurance for your tailored vehicle.
A modified car is one that has changes made to it by anyone other than the manufacturer. In some cases, standard car insurance won’t cover these vehicles, and you need to find specialist insurance for certain modifications. Usually, modified cars are more expensive to insure, but increased competition among insurers means it is still possible to get affordable cover for your vehicle.
This guide looks at modified car insurance; what it covers; how to get it, and the rules when it comes to modifying your vehicle.
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What type of insurance do I need?
There are three main types of car insurance in New Zealand:
Most insurers offer these three types of cover, but many do not cover a range of modifications. In this circumstance, you need to find a specialist insurer and take out one of the following forms of cover:
- Regular use. Protection for a modified vehicle that you use every day for personal or business use.
- Recreational use. Cover for a modified car, not used every day but occasionally driven for recreational use.
- Limited recreational use. Cover for modified vehicles that you don’t drive over a specific number of kilometres a year. You will need to check with the individual insurer to find out what its limit is.
- Club/concessional use. Cover for modified cars that are registered under a club or concessional scheme.
- Restoration/laid up. Cover for unregistered vehicles being restored, provided they are securely garaged.
What car modifications are covered by insurance?
When looking for modified or “unique” car insurance, you need to shop around, as the items covered may vary with each provider. Modifications typically not covered by mainstream insurers include:
- Custom paintwork
- Roll bars or roll cages
- Racing harnesses
- Nitro or hydrogen fuel equipped engines
- Turbo or supercharged engines
Modifications that are normally covered by most insurers include:
- Alloy wheels
- Bicycle racks
- Bull bars
- CD stackers
- Chrome exhaust systems
- Driving lights
- Leather seats
- Reversing cameras
- Roof racks
What can specialist car insurance do?
Most mainstream insurers shy away from performance-enhancing modifications, so if your vehicle has these, mainly alterations to the engine, chassis or suspension, you may need to approach a specialist insurer for cover.
They are more willing to insure the vehicles of motoring enthusiasts and appreciate that people take good care of these cars and invest a lot of time and money in them.
Unique car insurance
Specialist insurers can often provide unique car insurance to cover even the most unlikely modifications, by adding substantially to the excess the insured must pay, which helps to spread the risk and reduce the likelihood of a claim. Specialist insurers may charge more for the power increase of a vehicle. If you modify your car to make it 20% more powerful, you can expect to pay at least 20% more for your insurance premium.
However, if you install modifications to increase safety, this does not necessarily mean a lower premium, as the insurer must factor the value added by these into the cost.
Specialised insurance for modified classic cars
Specialists are especially good at taking care of modified classic cars because they can more accurately value vintage vehicles for the agreed value, not just market value. They also have a good understanding of car modifications and the car enthusiast’s needs.
For example, they readily accommodate classic cars, which might only be driven a week out of every month, by offering flexible lay-up periods. Most of them let you choose your mechanic; retain salvage and cover classic car modifications that would cause a headache for mainstream insurance companies.
Should I use modified car agreed value or market value?
When you look for modified car insurance, you need to decide whether you want market or agreed value cover.
- Market value. A market value policy pays you the car’s current market value, subject to depreciation, at the time of a claim. The replacement value of the vehicle will fluctuate with market conditions. A modified car insured under market value is almost always under-insured, and not covered for its actual value. Insurers rarely use market value for modified or classic cars.
- Agreed value. Agreed value is how much you and your insurer agree the car is worth. This number is locked in at the time of purchase, and you can only change it at certain times. Agreed value is especially useful for heavily modified or classic cars and insurers almost always use it, but generally it costs more.
Modified car insurance for young drivers
Young drivers (under 25), often find it challenging to get cost-effective insurance for modified cars because they attract an age-related cost increase and the extra expense associated with driving a modified car. Both of these are considered significant risk factors, so insurers raise the price accordingly and sometimes even refuse to insure these drivers. If you’re a young driver with a modified car and are having trouble getting insured, try the following.
- Compare modified car insurance from speciality modified car insurers, not just the big names. They will consider things like a safe driving record; claims history and whether you have any driving offences, rather than automatically assuming modified vehicles are riskier.
- Consider a higher excess if possible. A modified car is more valuable than its unmodified equivalent, meaning both its premium and excess is already inflated. If you can accept an even higher excess, this can significantly lower your premium.
- Go out of your way for discounts. Use every option available to lower your premium, and it can add up to a significant discount, as they are more prevalent from speciality modified car insurers. Try the following: Consider taking a defensive driving course; try to maintain a spotless record; look for multi-policy or drivers-club discounts; install safety features; declare a layup or limited driving period. As you compare modified car insurance policies, specifically look for ways to receive discounts.
Depends. How cool is your car? Like any car insurance policy, there are ways to reduce the cost of your premium when buying modified car insurance. These include:
- Driving a less expensive, less powerful vehicle.
- Nominating drivers, which can earn a discount.
- Restricting the age and number of drivers.
- Increasing your excess.
- Adding security, such as a car alarm or immobiliser.
- Packaging all your insurances with one provider, for a loyalty discount.
- Shopping around for a no claims bonus discount.
- Insuring for market value rather than the agreed value.
- Buying insurance online to receive a discount (up to 20%).
Insurance rules for modified cars
- Is your modification legal? Naturally, all changes made to your vehicle must be street-legal; otherwise, no insurer is even going to look at you. Also, if the police stop you with illegal modifications, you might face a fine and have your vehicle registration revoked.
- Was your modification approved? In New Zealand, if you modify under 500 vehicles a year, you need to meet the international standards for vehicle certification. Please see the NZ Transport Agency website for further details.
- Do I need to tell my insurer if I make modifications to my car? Yes. If you don’t inform your insurer, they can reject your claim and cancel your policy. If your vehicle is under warranty and you don’t tell the insurer, you may void the warranty entirely. If you don’t comply with legislation and your modification is illegal, you may receive a defect notice; a substantial fine and have your vehicle de-registered or impounded.
Modifications which are typically permitted include:
- Additional lighting
- Air shock absorbers
- Alarm systems
- Radio and stereo systems
- Roof racks
- Single tone air horns
- Stabiliser bars
Modifications which may not be permitted, include:
- Dark window tinting
- Loud exhaust systems
- Changes to the engine that do not fit the legal standard
- Illegal changes to the chassis
- Non-compliant changes to the tyres
- Changes to the suspension that do not comply with legal standards.
How modifications affect the cost of insurance
One of the main reasons insurers charge substantially more for custom modifications and unique cars or even refuse to cover them is because these modifications can unpredictably increase the value of the vehicle. Unlike standard parts, which cost a set price to replace in the event of an accident, custom parts cost more to replace, so insurers charge more to cover them.
The more extensive and expensive the modifications, the more you can expect to pay to insure them. The cost of replacing them is enormous and therefore, so is the cost of insurance.Picture: Shutterstock
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