Modified car insurance in the Philippines: All you need to know

Car modification is a popular practice around the world and the Philippines is no different. Here owners, irrespective of age, gender, or class are enthusiastic about car enhancement. Now modifications can be performance or aesthetic-related, however, in both cases, it is advisable to get the vehicle insured.

But, do you know insuring a modified car is much more complex than getting a standard car insured? Here Carmudi provides a comprehensive guide on modified car insurance in the Philippines, covering how modification affects car insurance and the steps car owners should take to protect their investment.

Also Read: Must-have car insurance policies for Philippine drivers

What is modified car insurance?

Insurance for modified cars covers vehicles that have undergone any form of physical or performance changes that alter the original manufacturer’s specifications. Some common modifications include -

• Aesthetic upgrades, like custom paint jobs and body kits
• Performance enhancements, such as engine modifications or suspension upgrades.

In the Philippines, it often becomes challenging for owners to secure standard car insurance for their modified car, as insurers put such enhanced vehicles under the higher-risk category. Why so? Well, that’s due to potential safety issues and the increased cost of repairs in the event of an accident. Therefore, special coverage, like supplemental policies, may be required to insure your modified vehicle.

Also Read: How do car modifications affect insurance in the Philippines?

Type of car modifications & their impact on insurance

There are two main categories of car modifications: cosmetic and performance-based.

Cosmetic modifications: It involves changes such as custom paint, aftermarket wheels, and body kits. These changes are generally seen as less risky, though they can still increase your insurance premium depending on the extent of the modification.

Performance modifications: Any enhancement done to a car’s engine, exhaust system, suspension, or transmission significantly affects its performance and safety. Because these modifications often make the car faster and potentially more dangerous, insurers typically see them as higher risk​. For this reason, the premiums for cars with performance modifications are usually much higher than for those with only cosmetic changes.

Modified cars and insurance providers

As mentioned, car insurance providers view modified cars as high-risk investments, but why? Here are a few major reasons -

Risk of accident: Cars with engine upgrades or performance mods are more likely to be involved in accidents due to higher speeds and altered handling capabilities.

Long & expensive repair: Modified parts are often more expensive to replace, and insurers factor this into the premium. Moreover, finding replacement parts for modified vehicles can be challenging, leading to longer and costlier repair processes.

Documentation issue: Insurers require clear documentation of all modifications, including receipts and professional installation records, to ensure accurate vehicle valuation. Failing to provide sufficient documentation can lead to denied claims.

Insurance for modified cars

Compared to standard car insurance, modified cars require additional coverage to stay protected from financial burdens during an accident or uncertain event. Some of the most common insurance options available are -

Supplemental coverage: This is an add-on policy that covers specific modifications, usually up to 10% of their total value​. While this does not cover the full cost of the modifications, it can still provide significant protection.

Classic or Collectible car insurance: If the car is an older or a collectible model that has been modified, some insurers offer specialized coverage designed for vintage or rare vehicles. This type of policy may include coverage for specific modifications, but it is often subject to the insurer’s discretion.

Comprehensive car insurance with modifications declared: Comprehensive insurance generally does not cover modifications unless they are explicitly declared at the time of the policy. It’s crucial to be transparent about all alterations to ensure they are covered; otherwise, the insurer may void your policy or deny claims.

How to insure a modified car?

Securing insurance for a modified car in the Philippines involves a few additional steps compared to insuring a standard vehicle. So, if you are someone considering insuring your modified vehicle, here are some of the steps to consider -

Declare all modifications

When applying for car insurance, make sure to declare every modification, regardless of how minor it seems. Failure to disclose modifications can result in denied claims or even cancellation of your policy.

Document everything

Keep all receipts and professional installation records for every modification made to your car. Insurers need these documents to assess the risk and value of your modified vehicle.

Consult the insurer

Before making any modifications, check with your insurer to find out how the changes will affect your premium and coverage. In some cases, your insurer may refuse to cover certain modifications, so it’s essential to be aware of the restrictions beforehand​.

Consider getting additional coverage

If your standard insurance policy does not cover modifications, consider purchasing supplemental coverage. While it may only cover a portion of the modification costs, it’s better than having no coverage at all.

Modified car insurance cost

As expected, modified car insurance is a bit expensive compared to standard car insurance. Typically, car owners usually end up paying high premiums, however, the cost depends on various factors including -

• Type and extent of the modifications
• Car’s overall value
• Insurance provider’s risk assessment
• Issues with modified car insurance

There are certain issues with modified car insurance that a car owner usually faces. These include -

High premiums: As modifications increase the risk of accidents and expensive repairs, insurers charge higher premiums for modified vehicles. However, applicants can negotiate these premiums by making sure the modifications are professionally installed and that all safety standards are met.

Limited coverage: Not all modifications are covered under standard car insurance policies. Insurers often impose caps on the amount they’re willing to cover, so it’s crucial to understand the limitations of your policy.

Voided claims: If a car owner fails to declare all the modifications or fails to provide adequate documentation, the insurer may deny the claim in the event of an accident.

Bottom line

Insuring a modified car in the Philippines is somewhat a complex process, however, it is essential to protect your investment and avoid potential financial pitfalls. Always be transparent with the insurer about any modifications, document all changes, and explore supplemental coverage options. While modified car insurance comes with added costs and considerations, having the right coverage will give you peace of mind and make sure you are financially protected.

Also Read: 8 Must-ask questions before buying car insurance