Insurance and Modified Cars Australia: What You Need to Know

Modifying your BMW, Audi, VW or AMG affects your insurance in two ways: the premium you pay, and whether a claim gets paid. Both depend on what you disclose and who you insure with.

How insurers view modifications

When you modify a car, you change its risk profile from the insurer's point of view. More power increases the risk of an accident. Exhaust changes affect the car's value and noise levels. Suspension upgrades can improve handling but change the risk profile.

Standard car insurers classify modifications in two ways.

• Performance modifications: tunes, downpipes, turbos, intakes
• Cosmetic or aesthetic modifications: wheels, body kits, exhausts, suspension

Both affect your policy. Insurers have different appetites for each type.

The disclosure requirement

This is the most important rule: always disclose your modifications to your insurer.

When you take out a policy, you have a duty of disclosure. If you do not tell them about a tune, exhaust or other modification and you make a claim, they can decline to pay. This is legally supported in Australia.

The duty of disclosure applies whether the modification was done before you insured the car or after. If you modify the car after your policy starts, you must tell the insurer.

What happens if you do not disclose

If you have an accident and the insurer finds out about a modification you did not tell them about, several things can happen.

• Claim denied: The insurer can refuse to pay the claim on the grounds that you did not disclose the modification.
• Policy voided: The insurer can cancel your policy from the start date, leaving you with no cover.
• Subrogation: If they pay a claim, they can recover costs from you because the policy was void.

We have heard stories from owners who had tune work done, did not tell their insurer and then had a claim denied. The savings in premium are never worth the risk of being without cover.

How it affects your premium

Performance modifications typically increase your premium. The amount depends on the mod and the insurer.

• Stage 1 tune: Premium increase of 10 to 30 percent is typical with mainstream insurers
• Stage 2 tune with downpipe: Increase of 30 to 50 percent, depending on the insurer
• Exhaust changes: Smaller increase, typically 5 to 15 percent
• Suspension and wheels: Variable, often modest or neutral

Some insurers are more modification‑friendly than others. Shannons, Entitlement and a few specialty providers have policies designed for modified cars. They charge a premium, but they are more predictable when it comes to claims.

How insurers handle claims

If you disclose the modification and it is covered by your policy, the claim goes through normal assessment. The insurer assesses the damage, arranges repairs and pays out according to the policy terms.

If you do not disclose, the insurer assesses the claim and the vehicle. They will find the modification during the assessment or through repair records. Once found, they can decline the claim.

Some key points on claims.

• At‑fault accidents: If you modify the car and crash it, the insurer will pay if disclosed. If not disclosed, they can decline.
• Theft: If the car is stolen, the valuation will account for modifications if disclosed. If not, they pay stock value.
• Write‑offs: Modification costs are not typically recoverable if not disclosed.

What you should do

1. Tell your insurer: As soon as the modification is done, call them and disclose it. Ask for the modification to be noted on the policy.
2. Ask for confirmation: Get written confirmation that the modification is covered.
3. Shop around: If your insurer cannot cover the modification or wants too high a premium, look for a specialist insurer.
4. Keep records: Keep copies of the tune file, data logs and receipts. These are evidence of what was done to the car.

The cost of not disclosing

In one scenario we have heard about, an owner added a Stage 2 tune and downpipe to a Golf R. Did not tell the insurer. At fault in an accident. The car was written off. The insurer declined the claim, citing non‑disclosure. The owner was left with no car and no payout.

The lesson is clear. The extra cost of disclosure is far less than the cost of a denied claim.

Sherzad Pro-Tip: Always disclose modifications before an accident happens. Once you have a claim, it is too late to add the modification to your policy. Call your insurer the day the tune is done.

How we can help

We document every tune we deliver with complete data logs and a written specification of what was done. Keep these records for your insurer.

When you book a tune, ask us for the documentation you need to disclose the modification. We can provide a specification of the tune, the hardware fitted and the power outputs.

Book a Health Check if you are unsure whether your current modifications are disclosed on your policy. We can give you the documentation you need to contact your insurer.