Do I Need Custom Parts and Equipment Coverage?

This depends on the value of custom parts, state you live in and insurer. Some car insurance companies like Progressive offer up to $1,000 custom parts and equipment (CPE) coverage automatically in their policies, providing there is physical damage coverage already. And some states allow such provision in policies while in others you have to buy this optional add on separately.

If the value of custom works is more than this amount, motorists can buy optional Customs Parts and Equipment Coverage, which usually comes as an endorsement on the policy explaining what are these items and what is the limit. Often there is a $5,000 limit to add this provision on a standard auto insurance policy. Anything above, motorists may need to buy specialty modified vehicle insurance.

If a policyholder didn’t buy CPE even though there are aftermarket parts and equipment installed and there is a maximum automatic coverage in their standard full coverage vehicle insurance policies of (say) $1,000, they would be paid up to this amount for the repair of those parts or in case of a totaled automobile. Companies won’t pay any more even though they are clearly there and damaged and policyholders have to pay the difference out of pocket.

Motorists must have full coverage automobile insurance to be able to add Custom Parts and Equipment coverage on their policies. Both Collision and Comprehensive come with a deductible, which may be applicable to CPE as well depending on the size of losses. Also, policyholders need to pay additional premiums to have this provision to be included.

These equipment and parts are the ones that are installed later on and can be anything like a stereo, navigation and entertainment system, alloy wheels, trims, bumpers, paint decals, lights, aftermarket seats, leather trimming and lifts. They need to be installed by an authorized dealer or a competent garage and cannot be a do-it-yourself job.

For example, you recently have treated yourself to a new $3000 worth stereo and audio set for the car. Now, it could be a mistake to assume that lately installed aftermarket equipment is automatically included in auto insurance coverage since they just replaced the original one. You would need to talk to the carrier about it and this may result in an additional premium.

If you spent $3,000 for a new stereo and audio set, you obviously enjoy listening to music while driving. Now consider this; your automobile is stolen and the insurer has to compensate you enough to buy another similar car. You don’t want to receive money for another automobile with the same age, make and model as your one with factory-installed stereo. You want one that has a better sound system just like you had. That costs extra money and therefore they need to pay you more, providing you have Custom Parts and Equipment endorsement.

Usually, they would check the market and find a couple of vehicles that are similar to the one stolen or totaled and offer a settlement reflecting the average market price. If they were aware of the improvements, they would add a bit more for them.

Auto insurance companies require previous declarations to prevent people making outrageous claims about how customized the stolen auto was and what extras it had. This can be done with an endorsement on the policy that clearly states your car has $3,000 worth of additional equipment installed. Generally, there would be a little more premium to be paid.

Replacing auto body parts is a totally different story. You don’t normally need to talk about them, unless you are taking the engine out in a sedan and putting in a twice-powerful sports car engine. Any performance enhancing modifications should ideally be discussed with the company beforehand or they should be informed as soon as possible. Also, they would want to know about any work on the moving parts like turning an automobile to a low rider.

Good communication is beneficial for you and them. It could create problems if it isn’t clear what is covered and what is left out, especially when you have a claim. Generally, you don’t want to leave anything to chance when it comes to insuring vehicles. You may have to pay a little bit additional premium but it is probably a fair price for having a peace of mind.