Car Insurance in Asia for Drivers with Modified Cars: What are the Risks and How to Protect Them?

Car Insurance in Asia for Drivers with Modified Cars: What are the Risks and How to Protect Them?
Car Insurance in Asia for Drivers with Modified Cars: What are the Risks and How to Protect Them?

Car modification is one way to express the owner’s style and taste. There are many types of modifications that can be made, ranging from those that simply change the color of paint, wheels or lights, to those that change engine performance, suspension or electrical systems.

However, did you know that car modifications can affect your car insurance?

Car insurance is financial protection provided by insurance companies to car owners in the event of damage or loss due to accidents, theft, natural disasters, or other unwanted things. Car insurance is usually divided into two types, namely All Risk and Total Loss Only (TLO).

All Risk is a car insurance policy that covers both partial and total damage. While Total Loss Only (TLO) only covers total damage.

Therefore, All Risk car insurance premiums are more expensive than TLO because the policy benefits are wider.

However, not all damage or loss experienced by your car can be covered by car insurance. There are several risks that are not covered by car insurance, one of which is a car modification that is not reported to the insurance company.

Why Car Modifications Must Be Reported to Insurance?

According to the Standard Motor Vehicle Insurance Policy in Indonesia (PSAKBI), Article 8 regarding Changes in Risk, the insured must notify the insurer of any circumstances that increase the risk guaranteed by the policy, no later than 7 calendar days if there is a change in the insured part of the motorized vehicle.

This aims to reassess the risks borne by the insurance company and adjust the premium or coverage conditions according to the latest condition of your car. If you don’t report your car modification, there are several negative impacts that can occur, including:

  • Damage or loss caused by modified components cannot be claimed. For example, you modify your car’s electrical system and a short circuit occurs which causes a fire. If you do not report these modifications to the insurance company, then the cost of repairing or replacing your car will not be covered by insurance.
  • The repair process at partner workshops becomes difficult or impossible. For example, you modify the engine or suspension of your car and damage occurs due to an accident. If you take your car to an insurance company partner repair shop, chances are that the repair shop does not have spare parts or special tools to repair your modified components. This could cause delays or rejections in the repair process.
  • Coverage can be terminated by the insurance company. If the insurance company knows that you have made a car modification without reporting and judges that the modification increases the risk significantly, the insurance company has the right to terminate the coverage by returning the premium as stipulated in Article 27 paragraph two of PSAKBI.

How To Protect Modified Cars?

If you want to modify your car without compromising your car insurance benefits, there are some tips you can do, including:

  • Report your car modifications to the insurance company before or as soon as possible after the modifications are made. Provide complete information regarding the types, specifications, and costs of the modifications you are making. If necessary, also attach photos or other supporting documents.
  • Follow the insurance company’s recommendations regarding premium adjustments or coverage requirements. The insurance company may increase your premium or provide additional conditions to cover the risk of modifying your car. If you agree, your cover will continue with the appropriate protection. If you don’t agree, then you can look for another insurance company that is more flexible or suits your needs.
  • Choose the type of modification that does not really affect the risk. There are several types of modifications that can be made without having to report to the insurance company or without having to increase the premium, as long as these modifications do not change the basic functions or safety of the car. For example, modifying the color of paint, wheels, lights, audio, or aesthetic interior. However, avoid modifications related to the engine, suspension, electrical system, or other vital components that can affect the performance or stability of the car.

Car modifications can indeed make your car appear more unique and attractive, but don’t forget the aspect of your car insurance protection. By reporting your car modifications to the insurance company and following the tips above, you can enjoy the results of your car modifications without worrying about the risk of damage or loss that is not covered by insurance.

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