If the aftermarket value that you’ve added to the car isn’t registered with the insurance company, you only get enough to cover the base stock model that you started out with. It doesn’t matter how much you’ve modified your car – if you haven’t paid the insurance company to cover the modifications, it’s as if you haven’t spent anything on it.
Liability insurance – the cheapest kind – only pays you for any damage you may cause to other parties through an accident. It doesn’t pay for the damage your accident has caused to your own car. For money to cover your car, you will need to sue the other party in the accident (if there is another party).
If you want the security of having your own insurance company cover the damage your car sustains, you’ll need to get collision and comprehensive coverage. Collision coverage covers your repair bills when you hit a lamp post or another car with an uninsured driver. Comprehensive insurance covers you when vandals or thieves damage or steal your car. With either kind of insurance, though, the insurance company will only give you the value that you are covered for – not for the lavish aftermarket modeling that you’ve done.
Most insurance companies will pay for up to $1000 of aftermarket parts even if they haven’t been informed about those parts beforehand. For a few parts like this, you just need to keep your receipts and take a few pictures to show the insurance company proof. You need to ask your insurance company to make sure what their policy is on undeclared aftermarket parts.
In the insurance business, aftermarket parts are called CPE – Custom Parts and Equipment. CPE insurance doesn’t cost more than $100 for about $7000 of extra coverage. You can’t just add CPE insurance to the cheap liability only policy, though. The CPE option is only available to customers who buy comprehensive and collision.
If you wish to buy a large amount of insurance to cover a car without actually adding the value of each aftermarket part up, you can always ask for stated value coverage. With this kind of insurance, you just tell the insurance company that your car is worth $40,000 or whatever. They take your word for it. You pay a large premium for this level of coverage and the insurance company pays you your $40,000 if your car is stolen.
What happens if you have a modified car and someone else hits your car? Do you get to sue their insurance company for your aftermarket parts?
Usually, you can get the other party’s insurance company to cover your aftermarket parts if you have proof that those parts existed and were worth what you claim. If you have insurance for these parts with your own insurance company, the other insurance company will accept that as solid proof.
Sometimes, aftermarket parts can cause a real claims problem – the insurance company can claim that it was your nonstandard aftermarket parts that caused the fire or other accident in the first place. This only happens, though, if you haven’t informed the insurance company of your aftermarket parts before the accident. Insurance adjusters don’t quibble over aftermarket parts if they already know about it.