Are my custom parts covered?
I have had numerous clients ask me if the modifications they make to their cars are covered by their insurance policy. Those custom upgrades range from a custom speaker setup to 22 inch rims and everything in-between. Most policies will not provide coverage for any non-factory upgrade to your vehicle unless you add a special endorsement to your auto policy, and those that do have coverage will limit it to just a few hundred dollars. With most insurers, the endorsement you need is called Custom Parts & Equipment (CPE) Coverage. This coverage specifically covers any non-factory upgrades you may have made to the vehicle.
So for all my off-roading Jeep and Honda lovers out there, make sure you have this endorsement on your policy so that all those fun upgrades you have done to your vehicles will be protected; otherwise, if something happens to your vehicle, your insurance provider is going to assume you have the standard stock equipment and only cover the costs to replace the damaged parts with replacement ones for what originally came with the car.
Here are a few examples of things that CPE coverage can cover:
- Sound systems
- Custom spoilers
- Lift kits
- Paint jobs
Lastly, to make sure that your custom parts and equipment are covered, your insurance company will ask for proof of professional installation or receipts of purchase to ensure that the parts were actually in/on your vehicle at the time of loss. It is always best practice to keep a record of any updates/upgrades you do to your vehicle to ensure that if something happens, you are fully covered.
I Only Want Name-Brand Parts, Is There A Coverage For That?
More than a few times I’ve had a client going through an auto insurance claim reach out to me and ask “Why are they putting generic parts in my car?”. The dealership tells them that if they don’t put the same name-brand parts into the car that it came with that there could be problems down the road.
Most insurance contracts are written to repair a vehicle with “like kind and quality” parts, but are not required to use the same exact parts that the factory used to build the vehicle. This becomes more problematic when you have a luxury or leased vehicle where maintenance is done strictly by the dealership and they are more ridged on what parts they are willing to use to make repairs. Sometimes the customer has had to pay the difference between what the insurance company would pay for the replacement parts and what the dealership charges for original factory parts.
How do you avoid this from happening to you? Thankfully, most auto insurance carriers offer an endorsement called Original Equipment Manufacturer Parts coverage, or OEM coverage for short. If you add this coverage you will be reimbursed up to the full cost of replacing parts with those that were used originally in the factory!
You have a brand new Jeep and accidentally back into a post, denting your bumper. Claim is filed and the dealership wants $2800 for the part due to the special model Jeep you own. The insurance carrier can find a non-Jeep replacement part for $1200. Your deductible is $500.
Without the OEM endorsement: Insurance provider pays $700 for the replacement part after your deductible
With the OEM endorsement: Insurance provider pays $2300 for the original Jeep part after your deductible
The cost of the endorsement is normally pretty cost effective, so be sure to ask your agent if this is something they recommend for your vehicle.
What's the best type of insurance coverage for collector/classic vehicles?
Many people believe that any car you drive should just be added to your regular auto policy, but if you have a classic or collector car that would be a mistake! The best way to protect a collector or classic car is to have them on their own special classic/collector car policy. Most normal auto insurance policies only pay claims on an ACV (actual cash value) basis; meaning the older the car, the less you will get paid when you damage the vehicle. This is especially problematic with a classic or collector car where the value comes from how rare it is, not because of it’s age.
There are special policies designed solely for Classic and Collector type cars. On these “Classic” car policies you can actually get an agreed value for your vehicles so that in the event of a total loss you are not losing thousands of dollars due to depreciation because of the age of the vehicle.
Fully Restored 1966 Ford Mustang with 1100 miles, market value: $50,000
Your car is stolen, you have a $500 deductible, what gets paid? A standard auto policy would depreciate it due to it’s 55 year age and pay you a few thousand at best. A classic car policy with an agreed value of $50,000 would pay you $49,500 as they only remove your deductible, the rest is covered.
Now, with that being said, you may ask why you don’t just insure all of your vehicles on these types of policies so that all your cars are protected at Replacement Cost. Sadly, these special policies have strict guidelines that prevent everyday commuter vehicles from being insured on them. The guidelines allow for the classic car insurers to charge low premiums to insure very expensive and rare vehicles by limiting the types of cars that they will insure. If you look for a quote from an agent they will likely make sure that most of the following are true in order to qualify for a quote:
- Annual mileage of 2000 miles or less
- You have a separate vehicle for everyday use to commute to work or school
- The vehicle has very low miles or is in short supply
- Your driving history is free of serious violations or other claims
If you qualify for a classic car policy you will find the premiums are very reasonable and the coverage leaps and bounds better than anything you would find on a traditional auto policy.
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