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Your Custom Car: What You Should Know About Insurance

August 14, 2012

If you’re planning to customize your car with aftermarket parts, custom paint, or a new stereo system, it’s important that you understand exactly how all those parts and upgrades are covered under your car insurance policy. Does your insurance company need to know? What custom parts will they cover? Get the facts before you spend a lot of cash on customizing your car.

Insurance and the Value of Your Car

Your insurance company values your car based on a system that uses market value data to determine its worth. That system doesn’t take into consideration things like upgraded wheels or custom pinstriping. If you have put a lot of money into customizing your vehicle and it is stolen or wrecked, your insurance company is under no obligation to pay for those upgrades if you haven’t notified them.

So how do you increase the amount your insurance company will pay out on your customized car? First of all, you have to make sure the insurance company knows about the changes you have made. Then, you will need to add a special coverage and pay an extra premium in order to assure coverage for all those parts, and even the paint job.

Custom Parts and Equipment Coverage

Many car insurance companies offer a coverage called Custom Parts and Equipment, or CPE coverage. This is usually part of your comprehensive and collision coverage, but doesn’t usually exceed $1000 in coverage. You can purchase an increased CPE option to add several thousand dollars in extra coverage for the after-market parts and even the custom paint on your car. This usually increases your coverage to around $5000.

This coverage is designed to cover a long list of custom accessories and parts that were not part of any package originally offered by the dealer when you bought your car. Some of the items often covered under this option are custom paint and chrome, racing seats, special wheels and tires, TV, DVD and other electronic equipment that has been permanently installed in the car, and anti-theft equipment. There are exclusions to this coverage, which usually include any equipment not permanently installed in the car, and items like radar detectors.

It’s a good idea to keep all receipts for the upgrades you have made to your car and to take pictures of all of the special items as they appear installed on the car. This will assist in proving the value of the upgrades in the event of a claim.

Special Policies for Special Cars

Customized cars that are still used regularly and are street legal can be covered under a standard auto insurance policy with some extra coverage added on for those custom parts and accessories. If your custom car is even more custom than that, however, you might want to consider a special policy.

Hot rods, race cars, and any vehicle that has been restored or upgraded for use in car shows or on the track may not fall under a standard insurance policy. These policies may be inadequate for the coverage needs of such a car, and in some cases, such as a car used on a race track or drag strip; you may not be offered coverage for those events.

There are special policies available to cover cars that fall outside normal use and common customization. Collectible car policies and race car policies are the best choice for these types of cars. They will use an appraised value to determine how much the car is worth, and cover it for the unique type of use for which the car has been prepared.

It’s important to note that custom items that are illegal on the road will not be covered and may in fact result in the insurance company non-renewing your coverage unless they are removed.

Tell Your Insurance Company

As soon as you install any custom parts or accessories, you should call your insurance company right away. They may request a copy of the receipt to keep on record in the event of a claim. If you haven’t yet increased your CPE coverage, you will want to do so before you head out on the road with that car.

Cars with a lot of custom work are at a higher risk of theft. Car thieves steal these cars and strip them of their valuable parts. Even if you don’t take that car out on the road, there is still a risk to having it sitting right there in your driveway; even in your garage. Call your insurance company right away and get your investment in those custom parts covered so you won’t be out a lot of money if something goes wrong.

You may also want to shop around for car insurance quotes, as each insurance company charges different rates.