Motor Insurance: The Hidden Claim Risks Of Aftermarket Parts

Many vehicle owners go for aftermarket parts when something breaks; a bumper here, a headlamp there. The replacements cost less and are easy to source, so the choice feels obvious. But motor insurers don’t always see it that way. Even a small aftermarket component can alter the risk profile of a vehicle and affect how a claim is settled. Many policyholders discover this only at the claim stage, when deductions or outright rejections take them by surprise.

Why Insurers Flag Aftermarket Parts As Modifications

Insurers always benchmark the vehicle against its original, factory-produced specifications. Any component that differs from the Original Equipment Manufacturer (OEM) standard is considered a change to that baseline. “Insurers consider the original specification of the car as the benchmark. Replacement of OEM parts with aftermarket alternatives is considered modification,” says Paras Pasricha, head–motor insurance, Policybazaar.com. If such a modification impacts cost, safety, or risk exposure, the insurer can reduce the payout or reject the claim.

However, the regulatory framework does not mandate the use of OEM parts. The policy instead places a duty of care on the owner. “There is no specific provision in the policy that says only OEM parts should be used. But the insured should maintain the vehicle in sound running condition,” says Hari Radhakrishnan, expert, Insurance Brokers Association of India (IBAI). So, aftermarket parts are not prohibited, but if they compromise roadworthiness, the claim becomes vulnerable.

Even if the change is purely cosmetic, insurers prefer to be kept in the loop. Letting them know about any replacement, more so when it involves safety components, wiring, or structural parts, can prevent arguments at the claim stage. Pasricha notes that timely disclosure is often the only way to prevent surprises during claim assessment.

How Surveyors Assess Damage And Why Claims Get Cut

When an insured vehicle suffers damage, the surveyor first decides whether the affected part requires repair or complete replacement. The insurer’s liability is calculated on the cost of a new OEM part, adjusted for depreciation based on the Insurance Regulatory Development Authority of India (Irdai) norms. The price of the aftermarket part installed on the vehicle has no bearing on this calculation.

In cases where a non-OEM or second-hand part was being used, surveyors may disallow replacement under the claim because its value cannot always be reliably established. As Radhakrishnan (added) points out, claims are usually settled on OEM dealer list prices, but this principle does not always extend to aftermarket components.

Moreover, if a cheaper part was inferior to the OEM original, insurers will not pay to “upgrade” it to OEM quality during a claim. Their liability is limited to restoring the car to its pre-accident condition.

Do These Parts Affect IDV Or Policy Terms?

Aftermarket accessories can affect the Insured Declared Value (IDV) if they are declared. Declared modifications are added to the IDV for a marginal premium and are covered accordingly. If you don’t declare these add-ons, insurers simply won’t cover them when they’re damaged, and they may even factor in a steeper depreciation rate because the parts aren’t OEM quality.

In principle, the IDV depends on the car’s make, model, and age, not on the aftermarket bits you’ve fitted. Even so, flagging any changes, especially those linked to safety, helps avoid back-and-forth during a claim.

The takeaway for owners is straightforward: aftermarket parts might feel like a smart saving, but keeping them under wraps can cost you much more when a claim is filed.