Enter Your ZIP Code

Modified Car Insurance Fraud – A Precaution for Insurers


Modified car insurance is a revolutionary system of coverage that addresses the need for security of practically all types of vehicles, whether brand new or second-hand, whether stock or customized. With this system, you car virtually fit any vehicle with coverage.

However, this benefit is not problem-free. Because of it being readily available to all types of automobiles, even those which have been heavily suited up, there is a high chance for fraud to be committed. True enough, modified car insurance fraud is slowly topping the list for US insurance cases.

The reason is this: since it is so easy to change the parts of a customized vehicle, it will also be easy for a car owner to replace parts registered under the coverage with different (and possibly incompatible) components that increases risk factors.

Modified car insurance fraud is more difficult to prove because of the nature of the automobile involved. Said otherwise, how do you prove that a car designed for customization was not so when it was insured? Even then, how do you trace those who are responsible? You may observe that this will cause multiple problems for the insurer.

It is also easy to install defective components in a vehicle, especially if a piece was purchased from a junk shop or worse, a black market. There is reason to believe that it is defective if it was imported without proper documentation, in other words, if it was smuggled into the state. If a driver or insurer has no mechanical knowledge of his ride, there is a great chance the company will get cheated to insure a defective ride.

Of course, a provider cannot just refuse from issuing a policy because of these things. It would be very bad for business, especially if the refusal was later found out to be groundless. So, what solution is there for a provider?

Before the company issues a modified car insurance policy, there must be a thorough examination and documentation of the vehicle. Otherwise, it will be easy for the swindler to make a false claim. They can do this by first requiring an applicant to complete all the required documents such as customization receipts, registration certificates, clearances from the DMV (although these may differ with each state) and the owner’s valid driver’s license. They must take down all the relevant information regarding the vehicle, such as serial numbers and body tags.

It may be easy to get fooled by an owner installing after-market components after getting insured. However, all this can be addressed by simple diligence and little street-smarts.