How Will Your Car Modifications Impact Your Insurance Premiums?

Modifying your car may cause your insurance premiums to go up, or may even cause your insurer to withdraw coverage. Here’s what you need to know before making changes to your vehicle.

Your car is not just a tool, it is an extension of your personality. If this statement resonates with you, you’re probably thinking of making modifications to your car.

While regulations on allowable car modifications remain tight, there’s still enough leeway for you to dress up your car with minor cosmetic changes, or to add and enhance certain functions.

So you don’t have to completely resign yourself to driving around in a car that looks just like any other. However, you do need to be aware that making modifications to your car could affect your car insurance.

Here’s what you need to know about car modifications and how they could impact your insurance premiums.

Understanding car modifications in Singapore

Do you need LTA’s approval for modifying your car?

It depends on the type of modification and how it impacts your car. Vehicular modifications fall into one of three categories:

• no approval required – these are generally modifications that serve a cosmetic purpose or does not negatively impact occupants, other road users or the public
• approval required – modifications that may alter the performance profile of the car
• not allowed – modifications that compromise the safety of the vehicle’s occupants and other road users, or pose a nuisance to the public

The full list of vehicle modifications can be viewed over at the OneMotoring website; see the following table for a quick summary.

Understanding how car modifications may impact insurance premiums

Do I have to inform my insurer of my car modifications?

Yes, you do.

Generally, car insurers do not want to insure a modified car, even if those modifications are of the type that do not require approval by the LTA.

Therefore, if you make modifications to your car and fail to inform your insurer, you could end up having your auto insurance claims rejected.

In fact, many car insurance policy wordings specifically point out that vehicular modifications will not be covered, unless prior approval has been granted by the insurer.

Are any and all changes seen as car modifications?

No, not all modifications will be considered as modifications by your car insurer.

Specifically, changes made to the car that fall within the manufacturer’s defined and acceptable specifications will not be considered as a modification.

For instance, if you purchase a car with a body kit installed by the manufacturer, your vehicle would still count as an “unmodified” car, as the body kit is offered under the manufacturer’s “standard specifications”.

The same goes for tyres and sports rims – such changes are not considered as modifications, as long as they do not exceed the manufacturer’s specifications. However, do note that in restoring your car, your insurer may opt to replace parts as per the manufacturer’s standard specifications.

Also, routine maintenance where like-for-like parts are used, and where the manufacturer’s specifications are not exceeded, will also not be considered modifications.

Neither would accessories that do not alter how your car operates, such as upholstery, audio and multimedia equipment, satellite systems, and such.

What should I do if I want to modify my car?

Before embarking on any modifications, be sure to clarify with your insurance provider on the changes you want to make, and whether they would accept insuring your car.

Depending on the nature of the modification, and your insurer’s evaluation, you could receive one of the following outcomes.

Continue covering your car with no added premiums

If your insurer determines there is no additional risk in continuing to cover your vehicle, they will agree to your modifications without increasing your premiums.

This is most likely to happen when it involves minor modifications that are LTA-approved, do not exceed the manufacturer’s accepted specifications, and do not reasonably alter the way your car works.

In this case, you may carry on with the modifications and with no changes to your auto insurance policy.

Continue covering your car with additional premiums

Your insurer may respond with a counter-proposal that contains a higher premium. You will have to pay this increased premium – or purchase an accessories rider, if available – in order for the insurer to cover your car modifications.

This may happen if you are planning on making expensive modifications to your car, using premium parts that are significantly more costly than mass market equivalents.

Repairing or replacing premium modifications would cost your insurer more money, which leads to an increase in your premiums to cover the risk.

Note that even if you’re willing to pay a higher premium, your modifications still should not exceed your car manufacturer’s acceptable specifications and limits – such modifications are unlikely to be covered by your insurer, as explained below.

Also, be aware that even if your insurer agrees to cover your modifications, they may impose a set of exclusions that may not grant you full reimbursement in some circumstances. Hence, always check the policy documents thoroughly and seek clarifications if you’re uncertain.

Decline cover

A third outcome that could arise is that your insurer declines to cover your modifications.

What this means is that your auto insurance policy will remain unaltered, and your vehicle will only be restored or repaired up to the original state of the car. All modifications and additional parts will have to be replaced out of your own pocket.

Illegal modifications, or those that would significantly alter the performance of the car – such as increasing its engine capacity – will cause your insurer to void the coverage on your car, leaving you without any insurance cover in an accident. This can happen even if your insurer only finds out about the modifications after the fact (and they will find out).

Therefore, don’t think that you can go ahead and add a nitrous injector because you want to feel fast & furious, and still expect your insurer to reimburse you for the original cost of the car when you inevitably crash. Insurance doesn't quite work that way.

Talk to your auto insurance provider

Car owners wishing to make modifications to their vehicles should obtain approval from two parties, LTA and their auto insurance provider.

LTA’s stance is clear and straightforward; you simply need to check what category the modifications you fall into, and proceed accordingly.

As for your insurance provider, different insurers may assess risk differently, and so it’s best to check directly with your insurer before you go ahead with the modifications.

Also, it would be beneficial to approach different auto insurers so as to suss out the best fit for your needs and budget.