How (And Why) Car Modifications Can Affect Your Insurance Costs
For most of the last year, the coronavirus pandemic has been pushing up used car prices here in Australia. And that made it a great time to sell a vehicle for those looking to buy something new. But now, a global microchip shortage (also caused by the pandemic) is making it hard to get a hold of a new car. For that reason, plenty of Aussies are considering investing in some upgrades for their current vehicles instead of waiting in a queue for a new one.
But what some don't realise is that certain types of car modifications can increase the cost of insuring their vehicle. And that could affect which kinds of changes they decide to make and which they decide to avoid. To help, here's a guide to how (and which) car modifications affect the cost of third-party insurance.
What Counts as a Car Modification?
Believe it or not, quite a few aftermarket changes you might make to your vehicle can have an impact on your insurance costs. This is even the case for modifications that could increase the safety of the vehicle and its occupants. Modifications considered when setting policy rates include:
- Custom Paint Jobs
- High-End Stereo Equipment
- Non-Standard Tyres
- Performance Exhaust Systems
- High-Performance Brakes
- Upgraded Suspensions
- Altered Exhaust Systems
Believe it or not, just about any substantial change you can make to a car might become a factor in the insurance rate you'll pay. And even upgrading your brakes can cost you extra, even though they could help you to avoid accidents under real-world driving conditions.
Why Do Car Modifications Affect Insurance?
In some ways, ending up with a higher insurance rate makes sense when you make certain changes to your vehicle. For example, an expensive stereo might increase the chance that your vehicle might be stolen or vandalized. And major modifications could substantially increase the value of your car, which would make it more expensive to replace or repair when necessary.
But there are also other factors involved in the rate-setting. That's because insurers group drivers and vehicles together into statistical groups, and they see drivers who modify their vehicles as more likely to get into accidents or engage in risky behaviours. So, where you see a sleek new set of speedy wheels, your insurer only sees increased risks.
And on top of all that, your insurer will also consider who did the modification work on your vehicle in the first place. If you're getting the work done through a well-known auto shop, your insurer will give you a better price than you'd get if you did the work yourself. This is true even if you're an experienced mechanic – so unless you run your own shop, you'll still pay a premium for going the do-it-yourself route.
There Are Legal Considerations, Too
Even if you decide to pay the additional insurance cost associated with a particular vehicle modification, that doesn't always mean you're in the clear. You still have to worry about keeping your vehicle within the law, which can vary from state to state in Australia. And there are a variety of common car modifications that people don't realize are illegal in most places.
To avoid trouble, it's best to consult the local regulations before making any substantial changes to your vehicle. And you should also run them by your insurer, too, to get their input. You may be surprised to find out that if your car has any modifications in a legal grey area, your insurer may not be willing to cover the vehicle at all.
And that can turn into a much more expensive lesson if your insurer finds out about your modifications after an accident or other problem with your car. In those cases, they may deny any claims you make and cancel your policy for good measure. Then you're stuck paying for your own repairs, just to end up with an uninsurable vehicle.
What You Can Safely Upgrade
Although there are no universal rules that insurers follow when considering vehicle modifications, there are only a few minor changes you can make that most won't penalize you for. If you add a luggage rack on your vehicle's roof, for example, most insurers won't care very much. The same goes for rear bike racks and tow bars.
But keep in mind, though, you'll still need to keep your vehicle's operating weight (including whatever it's carrying or towing) within safe limits at all times. And you'll also have to notify your insurer of the changes you've made. If you make too many changes – even minor ones – your insurer might decide that your car no longer matches the vehicle listed on your policy and deny your claims if you get into an accident or need repairs.
The Bottom Line
At the end of the day, the extra cost you might pay in insurance might be worth it to you for certain modifications. After all, if you're fixing up your car instead of purchasing a new one, you were likely prepared to pay a little bit extra anyway. But there is a very specific way you should approach any modifications if you plan to make them.
To reiterate, always make sure that you check that the modifications you plan to make are legal in the territories where you keep and operate your vehicle. Then, make it a point to check with your insurer before you do anything, so they can let you know how it might affect your rate. And keep in mind that it's best to leave your vehicle upgrades to the professionals – even if you're certain you can handle the job yourself.
If you do all of that, there's a good chance you can keep the impact on your insurance to a minimum. But better still, you'll avoid any unpleasant surprises when you have to make a claim for damage to your vehicle. That way you'll be able to keep it in great condition and on the road until the new car market gets back to normal. And if you're lucky, the upgrades you make to your current car might help it to retain more value when the time comes to sell it. In other words, it's a win-win for you and your car.