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Car Modifications Impact Insurance: What Car Owners Should Know

Car customizing is an increasing trend in India, especially for young drivers who upgrade their vehicles to improve performance or reflect their identity. The car customizing industry, from performance improvements like turbo kits to cosmetic enhancements like alloy wheels, is growing in popularity among many car owners. However, a number of modified car owners are unaware of the impact these changes may have on their car insurance rates, policy terms, and legality.
It is important to understand how Car Modifications can affect car insurance and compliance with Indian law before making any changes.

What Are Car Modifications?

Car Modifications refer to any change from the original factory specifications of a vehicle. These are generally classified into three categories by transport authorities and insurers:

  1. Performance Modifications
    Changes made to improve engine size, speed, and handling:

    • Turbochargers or superchargers
    • Engine tuning or remapping
    • Advanced suspension upgrades

  2. Cosmetic Modifications
    Modifications aimed at improving or customizing the vehicle’s exterior look:

    • Alloy wheels
    • Vinyl wrap or custom paint
    • Vinyl decals, stickers, or body kits

  3. Safety and Security Modifications
    Enhancements aimed at improving vehicle safety or preventing theft:

    • Reverse parking sensors and cameras
    • Certified anti-theft alarm systems (ARAI-approved)
    • Dashboard cameras

Note: Even minor changes such as tinted windows or upgraded headlights may be considered modifications depending on your car insurance provider.

Also Read: Car Wrapping in India Cost Benefits and Legal Guidelines

How Vehicle Modifications Can Affect Your Premiums

In India, car insurance companies assess premiums based on the risk associated with the vehicle. Modifications that boost performance, alter the car's aesthetics, or raise the risk of theft generally lead to higher car insurance premiums.

Modifications That May Increase Premiums

Modification Type

Estimated Premium Change

Reason

Turbochargers / Engine remapping

80% to 130%

Increases speed and accident risk

Alloy wheels

5% to 10%

Makes the vehicle more attractive for theft

Custom body kits / spoilers

10% to 25%

May negatively affect handling and safety

Suspension upgrades

20% to 30%

Alters road behavior of the car

Modifications That May Decrease Premiums

Modification Type

Estimated Premium Impact

Reason

ARAI certified anti-theft devices

2% to 5% decrease

Reduces the risk of theft

Rear parking sensors or cameras

Somewhat of a decrease

Helps prevent accidents while parking or reversing

Dash cameras

Neutral to slightly decrease

Supports accident claims with video evidence

Legal Framework for Vehicle Modifications in India

Vehicle modifications in India are governed by the Motor Vehicles Act of 1988. A Supreme Court ruling in 2019 further clarified that structural changes beyond the manufacturer's specifications are not allowed unless approved by the RTO.

Allowed vs Not Allowed Changes

Modification Type

Legal Position in India

RTO Action Required

Cosmetic changes (paint, wraps)

Allowed with a note in RC

Update RC to reflect visual changes

Performance upgrades

Generally restricted

Re-registration with RTO if approved

Structural changes

Not permitted without approval

Generally not granted

ARAI-approved safety devices

Completely legal and recommended

No additional approval needed

Failure to declare Car Modifications may result in fines, registration issues, or car insurance claim rejection.

What Could Go Wrong If You Do Not Declare Modifications to Your Insurer?

Not informing your car insurance provider about Car Modifications—intentionally or unintentionally—can lead to serious consequences:

  • Claim Denial: Undisclosed modifications can lead to rejection of accident-related claims.
  • Policy Cancellation: Insurers may cancel the policy if they discover undeclared changes.
  • No Coverage: You may not be covered for the value or risks of the modification.
  • Criminal Liability: Unapproved changes may attract legal action under the Motor Vehicle Act.

To avoid these risks, always declare Car Modifications and get approval where necessary.

Checklist: What to Do Before and After Modifying Your Vehicle

Before Modification

  • Check if the modification is legal in India.
  • Consult your car insurance provider to understand how it affects your policy and premium.
  • Keep all receipts and installation certificates for documentation.

After Modification

  • Inform your car insurance provider and submit all necessary documents.
  • Notify the RTO to update your RC if visual changes have been made.
  • Request an updated Insured Declared Value (IDV) from your insurer.

Common Misconceptions About Modifications and Car Insurance

Myth

Reality

Only major modifications matter

Even small changes like wheel upgrades can affect car insurance

If it looks good, it must be legal

Many cosmetic enhancements are illegal under Indian regulations

Insurers only care about engine upgrades

Aesthetic changes can increase theft risk, affecting car insurance

Safety devices may not be accepted

Certified safety devices are encouraged and may reduce car insurance premiums

Conclusion

Personalizing your car can be exciting, but it also brings legal and financial responsibilities. In India, modifying your vehicle can impact your car insurance premiums depending on the type, scale, and risk of the modifications. Additionally, some changes are illegal unless approved by the RTO under applicable laws.

To stay protected:

  • Notify your car insurance provider
  • Obtain legal approvals if required
  • Maintain proper documentation

This ensures your car insurance remains valid and provides financial protection in case of accidents or theft. Staying informed and compliant can prevent significant problems in the future.

Also Read: Legal and Illegal Car Modifications in India: A Complete Guide

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