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Car Insurance for a modified car

Whether you’re a car enthusiast or you have accessibility needs, there are many reasons why you might modify your car. But whatever the case may be, you should be aware that car modifications can also modify your insurance availability and costs.
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Updated 14/08/2023
What changed?
Updated sections, including information on how modifications can impact insurance premiums.
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Written by

Mel Basta

Updated 14/08/2023

What changed?

Updated sections, including information on how modifications can impact insurance premiums.
Our aim is to help you make better informed decisions. That’s why iSelect’s content is produced in accordance with our fact-checking and editorial guidelines.

Edited by

Laura Crowden

Find out more about how we make money.

View our Privacy Policy.

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How can car modifications impact Car Insurance? 

It may be stating the obvious, but there are generally two main reasons you might want to modify a car: to make it look better or perform better.  

To insurers, this can sometimes mean there is a greater risk of your car being stolen, or a greater risk of you having an accident.  

It also means repair or replacement costs could be higher. And with these higher risks, you could well end up paying higher premiums. 

However, a less obvious reason to modify your car may be a result of having mobility issues, or living with a disability. 

For this reason, there are ways that your state’s or territory’s transport authority can help you cover the costs of necessary car modifications too, such as via the TAC in Victoria.1 

What counts as a modification? 

Whenever you make additions to improve your car’s performance or appearance, or to make it more accessible beyond standard inclusions, it’s usually classified as a modification.2  

That could include, but is not limited to, the features listed in the table below:

For drivers seeking performance or appearance upgrades  For drivers living with a disability or mobility issues
Spoilers Wheelchair accessible conversion
Custom paint jobs Hand controls
Window tinting Loading devices
Neon lights Major changes to the body of the vehicle
Wider tyres Steering aids
Alloy wheels Left-foot accelerator
Aftermarket exhaust systems Extended or additional mirrors
Roll bars
Higher performance brakes
Sport seats
High performance stereos
Upgraded suspension
Turbochargers or superchargers

As modifications may impact an insurer's decision to insure you, if you make any changes or modifications to your vehicle, it’s important to notify your insurer to ensure your vehicle is covered. 

Remember that a claim may be denied if your car has illegal modifications. 

Do insurance providers cover modified cars? 

Yes, there are insurance providers who cover modified cars. 

Beyond compulsory/green slip insurance, you may also want to consider an extended level of care with third party property, third party fire and theft, or comprehensive car insurance. 

Bear in mind that cars with complex modifications may require an insurer that specialises in car modifications.

Will I pay more for insurance if my car has modifications? 

It’s likely that premiums for a modified car could be higher than those for a car without modifications. 

But if you require modifications to your car because you live with a disability or have mobility issues, then your state or territory’s transport authority can help you cover the costs involved under the following conditions:3 

  • Vehicle modifications that are necessary to help you get in and out of your vehicle, drive, load mobility aids, or to safely travel as a passenger. 
  • Minor changes such as non-permanent equipment or accessories that can be installed and removed from a vehicle (e.g. hand controls or loading devices.) 
  • Major changes such as wheelchair accessible conversion or changes to the body of the vehicle. 

As an example, for drivers in Victoria living with a disability or mobility issues, the Victorian Transport Accident Commission can help cover the difference between a quote for the modified vehicle and what it would cost to insure it if it were unmodified.4 

As always, each individual situation is unique and would need to be assessed by the insurer or by your relevant transport authority. 

Do I need agreed value or market value insurance?

While the market value of your car is the total value of your car at the time you make a claim, the agreed value is the total value of the car which is decided between you and your insurer when you take out a policy. 

Both options have their pros and cons, but generally, market value can be cheaper than agreed value. 

However, keep in mind that when it comes to modified cars, an agreed value policy may be a more suitable option as it will allow you to replace it for a specified value that factors in the additional modifications.5 

What if I use my modified car for racing or off-road activities?

If you’re planning on using your modified car for motorsports,  it’s likely that you’ll need to purchase specialist car insurance for motorsports professionals. 

Any driving activity that’s out of the ordinary day-to-day driving poses a higher risk to the insurer, so check your Product Disclosure Statement (PDS) to ensure you’re covered for off-road activities, or take out  a policy that includes cover for off-road driving.  

Will insurance cover me if my modifications are stolen?

Yes, as long as you have comprehensive car insurance or a third party fire and theft policy in place, and you have agreed on the value of your modified car with your insurer, your insurance policy can help provide cover in the event your modifications are stolen. 

But remember, if you modify your car after you’ve taken out a policy and fail to notify your insurer, you may not be covered at all due to non-disclosure. So always tell your insurer about any modifications!  

You must ensure that you have a level of cover you’re comfortable with by reading through your Product Disclosure Statement (PDS), which will clearly state the inclusions and exclusions of your policy, as well as any add-on cover you may have chosen. 

Will insurance cover me if my modification malfunctions and damages my car?

No, a car modification that malfunctions is likely to be considered a mechanical fault, and isn’t generally classified as an insurable event. 

This is because mechanical faults are typically caused by things like defective parts, wear and tear, corrosion, leaks, friction, or rust, and as such, should all be prevented and treated by a licensed mechanic.  

Insurable events are things that are caused by accidents, fire, theft, or malicious damage, and are classified as insurable because by nature they are accidental and unexpected.

Can all modifications affect my premiums?

Always check with your insurer before you make a modification, since most insurers make it mandatory for you to inform them of any changes you make.

While larger additions are likely to change your premiums or impact an insurer's decision to offer insurance, there are minor modifications that may not.

So, is making modifications worth it?

Only you can truly appreciate any modifications to your car, for some of us, our cars are our lives.  

Still, it’s a good idea to know how much your additions will cost you in car insurance premiums.  

So before you make any changes, you should talk to your insurer about how any intended modifications could affect your policy or premiums. 

Are some car modifications illegal? 

What is classed as illegal can change from state to state, so be sure to check with your state’s or territory’s relevant authority before you make any modifications. 

Check with your local transport authority regarding modification legalities: 

So where to now? 

iSelect can help you compare Car Insurance policies on offer from our range of providers*. Start comparing online, or call our friendly team on 13 19 20.

1 Transport Accident Commission - Driving and vehicle modifications 
2 Queensland Government | Department of Transport and Main Roads – Vehicle modifications
3 As above 
4 As above
5 Budget Direct – Market value vs. agreed value – What’s the difference?