Do aftermarket parts affect insurance?

Aftermarket parts, or performance parts, are accessories that you add to a vehicle after its purchase. Common aftermarket parts include sport wheels, rims, “spinners,” cold air intakes, and turbochargers.

Many of these parts are designed to increase your vehicle’s performance. Others exist solely for looks. Regardless of whether your aftermarket components are for performance or looks, your insurance company classifies them as performance parts. Traditional insurance excludes them which could be a rude awakening, especially in the event of a total loss.

Insuring aftermarket parts can be tricky. Most states have no regulations governing how insurance companies cover these parts. In a claim situation, insurance companies are free to value aftermarket parts as they see fit.

Because insurance companies are businesses trying to make money, their goal is to maximize revenue and minimize expenses. They have a vested interest in paying out as little as they get away with.

The following sections can help you make sense of the confusing process of insuring your aftermarket parts. Understand that your insurance company has its own system for valuing these parts.

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Often, this system isn’t clearly defined. Speaking with your agent can help you get on the same page.

What are aftermarket parts?

Aftermarket parts are also known as performance parts but they don’t necessarily improve your car’s performance. For instance, shiny rims that keep spinning even when your car stops are defined as performance parts even though they don’t change the way your car drives. They do cost extra money, and collision or comprehensive coverage typically won’t cover the extra cost. Unfortunately, many people pay for basic comprehensive insurance not knowing this ahead of time.

For the most part, an aftermarket part is:

1. Any accessory that doesn’t come from the original equipment manufacturer
2. Any accessory you add to your car after you purchase it

Unlike parts that come from the factory, aftermarket parts don’t appear in insurance adjusters’ valuation guides. This can lead to them being undervalued in an insurance claim situation. They are most common in classic cars, which are also routinely undervalued because of their age.

Consequently, you want to make sure you’re on the same page with your insurance company and agent when you take out your auto policy.

Does insurance cover aftermarket parts?

The insurance company has a lot of latitude for how they cover aftermarket parts. State regulations governing insurance coverage for performance parts are minimal.

The government requires that insurance companies pay claims in one of two ways: using the vehicle’s replacement cost or using the vehicle’s cash value.

Replacement Cost

The replacement cost method pays out the amount it would take to restore the car to its pre-accident condition. This cost can be difficult to estimate, particularly if your car has been heavily modified.

A good chance exists that there will be a discrepancy between what you claim your aftermarket parts are worth and what the insurance adjuster claims they’re worth.

This discrepancy is why you always want to keep your receipts when you buy performance parts for your car.

Cash Value

The cash value method pays out the vehicle’s market value at the time of the accident. You’ve probably heard of the various “blue books” that value cars. The insurance adjuster uses one of these books to determine your car’s market value.

Blue books don’t take aftermarket parts into consideration. So if your car is modified and your insurance company provides coverage for modification using the cash value method, this method isn’t likely to work out in your favor.

Covering Your Aftermarket Parts

Standard insurance coverage is likely to undervalue your aftermarket parts in a claim situation so you’ll probably want to take extra steps to make sure these parts are insured at the level you need. The first step is to talk to an insurance agent and specifically look for aftermarket parts coverage. You can add on a certain amount of extra coverage, but it’s generally best to go with companies that specialize in covering cars like yours.

Some companies specialize in classic cars while others specialize in speed and the additional cost of speed-related costs. Any auto insurance policy can be upgraded for additional coverage, but a company with the right experience can do much more.

Custom Parts and Equipment (CPE) Coverage

CPE coverage exists solely for aftermarket parts. To be eligible to buy this add-on coverage, you must carry both comprehensive and collision coverage on your vehicle. CPE coverage is usually subject to the same deductibles as your comprehensive and collision policy.

Before buying a CPE policy, it’s important to understand exactly what it covers. They’re not all the same. There’s no guarantee that a CPE policy covers your specific aftermarket products but here are some common items these policies cover:

• Customized wheels and rims
• Special tires, such as racing tires or oversize tires
• Stereo and TV equipment
• Custom paint jobs
• Aftermarket seats
• Running boards, fog lights, bed liners, trailer hitches, and so forth

Read more: Will auto insurance pay for paint jobs?

This list isn’t exhaustive. If you have an aftermarket item that isn’t listed, you can probably shop around and find a CPE policy that covers it.

These policies vary in price based on the scope and amount of coverage. If you have expensive aftermarket parts and want to ensure they are at full value, your auto insurance premium will undoubtedly be expensive.

Agreed Value/Stated Value Policy

Another option is to purchase an agreed value or a stated value policy. These policies represent up-front agreements with your insurance company to cover your vehicle at a certain value that may differ from its blue-book value or replacement cost.

With an agreed value policy, it works just like it sounds: you and your insurance company agree upfront on the amount they’ll pay you if your vehicle is totaled or stolen.

Let’s pretend you purchase a Honda Civic for $20,000. You install turbochargers, NOS tanks, racing stripes, custom exhausts, and so forth. The modifications set you back an additional $30,000 on top of what you paid for the car.

With an agreed value policy, you pay much more in premiums than you would pay to cover a $20,000 Civic but the insurance company agrees to insure your Civic at $50,000.

A stated value policy lets you state the amount of insurance you want on your car. It differs from an agreed value policy in that it doesn’t necessarily cover your car at its full value.

Suppose you purchase a classic car from Jay Leno for one million dollars but when you price out insurance at that level, you find it exorbitantly high.

Realizing you won’t be driving the car much and that you have it safely secured in your garage, you feel comfortable insuring it at a lower value. So you state your coverage level at $250,000, and your premiums are based on that amount.

Getting the Most for Your Aftermarket Parts

Unless you go with an agreed or stated value policy, the value of your aftermarket parts is steeped in subjectivity. Chances are, when you file a claim, your insurance company will argue they’re worth less than what you say they’re worth.

It’s vital to keep all receipts when you buy performance parts for your car.

Suppose your insurance company uses the replacement cost method to pay claims. They have an esoteric formula to determine what it would cost to replace your vehicle.

Rest assured, the formula almost never works out in your favor. If you have receipts that show exactly what you’ve put into the car, you immediately have a stronger argument that your claim is worth more.

Finding the Best Auto Insurance for Your Needs

You can find the best auto insurance deal by comparing several policies and reviewing your coverage every six months. You have many options available, so it’s wise to explore some of them before making your choice.

A good rule of thumb is to compare at least three to four car insurance policies before choosing one.

The first quote you receive isn’t always the best one, even if it sounds competitive but it provides a good frame of reference with which to compare additional quotes.

Once you’ve seen three or four policies and compared them side by side, you’ll have a better idea of what’s a good deal and what isn’t.

You’ll want to review your coverage thoroughly every six months when your policy is up for renewal. Your insurance needs to change over time. Moreover, the insurance landscape itself changes. The policy that was the best deal six months ago might not be going forward.

Aftermarket parts can make your car more attractive and more fun to drive but they can be tricky to insure. Make sure you understand how insurance works on performance parts. Get on the same page with your insurance agent regarding what is and isn’t covered.

Case Studies: The Impact of Aftermarket Parts on Insurance

Case Study 1: The Cost-Saving Alternative

In this case, a car owner opted for aftermarket parts to repair their vehicle after an accident. The insurance company, however, had a policy that only covered the cost of OEM parts. As a result, the car owner had to pay the difference out of pocket. This case highlights the importance of understanding your insurance policy and its specific requirements for part replacements.

Case Study 2: Manufacturer-Approved Aftermarket Parts

In this case, a car owner used aftermarket parts that were approved by the vehicle manufacturer as suitable alternatives to OEM parts. The insurer covered the repair costs smoothly, acknowledging the quality and compatibility of the parts used. This highlights the importance of using approved aftermarket parts for hassle-free insurance claims.

Case Study 3: Incompatibility and Denial of Coverage

An insured car was repaired using aftermarket parts that proved incompatible with the vehicle’s systems in this case. As a result, the car sustained additional damage, prompting the insurance company to deny coverage. This example highlights the potential risks connected with employing aftermarket parts that are incompatible with the vehicle’s unique make and model. (For more information, read our “What is the difference between a car’s make” and “model”?“).

Case Study 4: Insurance Coverage for OEM Parts Only

In this case, an insurance policy explicitly stated that only OEM parts would be covered for repairs. The car owner, despite preferring aftermarket parts for their affordability, had to bear the entire cost of the repairs themselves. This case highlights the need to thoroughly review insurance policies and understand their coverage limitations.

Case Study 5: Enhanced Vehicle Modifications

In this case study, a car enthusiast made extensive modifications to their vehicle, including aftermarket parts that enhanced its performance. The insurance company denied coverage due to non-standard parts, showcasing the consequences of major modifications on insurance eligibility.