How Modifying Your Car Affects Your Insurance

Introduction

A car modification can affect both its road-law status and the way it is described on an insurance policy. The key point is not to assume that a change is automatically covered, automatically excluded, or automatically legal for road use. In our editorial review, the practical approach is to check the proposed work with both your insurer and, where relevant, the vehicle-certification system before you proceed.

For a broader view of cover types and policy comparison points, see our car insurance guide.

What insurers may regard as a modification

Definitions are insurer- and policy-specific. For example, AMI’s current wording describes a modification as a change from the manufacturer’s original specifications or recommendations, a performance enhancement, or a change to the vehicle’s appearance, safety or handling. AA Insurance similarly uses a definition based on changes beyond the manufacturer’s original specification.

Depending on the policy, this can include changes such as:

• alloy wheels or other non-standard wheels;
• non-standard exhaust work;
• lower springs or other suspension changes;
• engine, fuel-system or computer changes;
• steering, chassis or structural changes;
• custom paint and other cosmetic upgrades; and
• aftermarket stereo or other electrical equipment.

Do not assume that a particular item is too small to matter, or that every item must be treated in the same way. Ask your own insurer whether the item is an accessory, a modification, or information it wants recorded on the policy.

Quick checklist: insurance and road-use questions

Tell your insurer before and after the work

ICNZ advises consumers to update their insurer when applying for cover, at renewal, and when circumstances change between those points; non-factory vehicle modifications are specifically included in its examples. Consumer Protection NZ also advises motorists to tell their insurer about alterations such as lowering, custom paint or performance enhancements.

This is more than an administrative step. Consumer Protection NZ warns that, after an accident, a policy may not cover undisclosed modifications when the insurer should have been told and a higher premium may have applied. The outcome will depend on the policy, the facts and applicable law, so it is better to obtain a clear answer before fitting the part or booking the work.

As at 17 August 2026, the Contracts of Insurance Act 2024 is not yet in force. Its remaining provisions must commence no later than 15 November 2027 unless brought into force earlier by Order in Council. That future commencement position should not be used as a reason to delay disclosure: current consumer and industry guidance still supports providing complete, relevant and up-to-date information.

Road legality and insurance are separate checks

Insurer acceptance does not establish that a vehicle is legal for road use, and LVV certification does not itself establish insurance cover. They are separate questions.

NZTA says a heavily modified vehicle may need Low Volume Vehicle (LVV) certification before it can obtain a WoF. Its examples of work particularly likely to need certification include modified suspension, engine conversions or modifications, racing seats and steering modifications. Where certification is required, the LVV certification plate must be fitted within two months of the certification inspection. Without that plate, the vehicle is not certified and cannot legally be driven on the road.

Further modifications after certification may require new certification. Check the current NZTA guidance for the work you are planning rather than assuming an existing plate covers every later change.

Value: do not assume upgrades are automatically included

An agreed value is an amount agreed between you and the insurer when cover starts and at each renewal. It is not a guaranteed measure of the value of later, undeclared modifications, and it does not automatically mean that every amount spent on upgrades will be paid.

When we compare policy information, our team recommends checking the amount on the current policy schedule, the settlement basis, and whether the insurer has accepted the vehicle as modified. Keep invoices, photographs, installation details and any certification records. These documents can help describe the vehicle and its changes, but they do not guarantee claim acceptance or a particular settlement amount.

What to do next

1. List the vehicle’s existing non-factory changes and the work you plan to carry out.
2. Read your current policy wording and schedule, especially definitions, exclusions and the insured-value or settlement section.
3. Ask the insurer in advance whether it will cover the specific modification and whether it needs the policy details updated.
4. Check whether the work requires LVV certification or any further certification after earlier work.
5. Retain receipts, photos, workshop information and certification documents, then review the policy again at renewal and after any further changes.

This article provides general information, not personalised insurance or legal advice. Policy terms, eligibility and underwriting decisions differ, so rely on your own current policy documents and the insurer’s written response for your vehicle.

References

• NZ Transport Agency Waka Kotahi — Modifying your vehicle
• Consumer Protection NZ — Car insurance
• New Zealand Legislation — Contracts of Insurance Act 2024
• Insurance Council of New Zealand — Duty of Disclosure: What to Tell Your Insurer
• AMI Insurance — How Are Modified Vehicles Covered
• AMI Insurance — Car Insurance Policy Wording
• AA Insurance — Third Party, Fire & Theft Car Insurance Policy

Author / Editorial Team

This content was produced by Insurspy’s internal editorial and research team. In our editorial review, we compare publicly available policy information and prioritise authoritative New Zealand government, legislation and insurance-industry sources. We review articles for accuracy, currency and practical usefulness, but readers should always check current policy wording and their insurer’s response for their own circumstances.