Understanding Aftermarket Parts and Car Insurance

What are Aftermarket Parts?

Aftermarket parts are replacement parts not made by the original equipment manufacturer. They are used to replace damaged parts in automobiles and other equipment but may alter insured item coverage. They are similar to generic pharmaceuticals that are cheaper than brand-name medication but equally effective.

The Certified Automobile Parts Association (CAPA) issues guidelines for aftermarket parts, setting the gold standard for safety due to rigorous testing.

How Aftermarket Parts Work

Repairing a damaged vehicle can be expensive, so motorists opt for aftermarket parts whenever possible since they are less expensive than parts made by OEM.

Key Takeaways

• Aftermarket parts are also called non-OEM parts, generic parts, or competitive replacement parts.
• Some consumers worry about quality or safety, but auto experts confirm these fears are unfounded.
• Using aftermarket parts can be more cost-effective than using OEM parts.
• In a car accident, an insurance company may suggest using aftermarket parts to repair the vehicle instead of OEM parts.

Depending on the auto policy, allowing the repair shop to use aftermarket parts may alter the coverage going forward.

The National Association of Mutual Insurance Companies estimates that aftermarket parts cost up to 50 percent less than OEM counterparts, saving car owners over $2.2 billion annually on repairs. This cost reduction benefits insurers and potentially lowers auto insurance premiums.

Upgrades include custom paint jobs, different wheel rims, stereo systems, or detailing.

When purchasing or reviewing an insurance policy, aftermarket coverage is usually found in the custom parts and equipment provision. This coverage may have relatively low limits. In some cases, additional coverage for aftermarket parts may be necessary, especially for upgrades not installed by the vehicle manufacturer.

OEM vs. Aftermarket Parts

High-quality aftermarket parts can be the best option, especially for older cars. While some aftermarket parts may have questionable quality, most are equal to or better than OEM parts and are more readily available.

An argument against using aftermarket parts is that they can void warranties. However, the Magnuson-Moss Act prohibits using language to explicitly prescribe the use of a company’s product, meaning manufacturers cannot force consumers to use their product through the threat of a voided warranty. This act only applies to consumer products used personally or by families and households.

Special Considerations

The amount an insured driver receives for repairs to aftermarket parts and upgrades depends on the insurer’s replacement schedule. The insurer may depreciate the original value of the parts according to a formula and only cover the remaining value.

Insurance regulations regarding aftermarket parts vary by state. As of 2017, 31 states required insurers to disclose repair estimates with non-OEM parts. Twenty states required identifying the manufacturer of aftermarket parts, while 13 states required aftermarket parts to be of "like kind and quality" as OEM parts. Six states also required the insured’s consent before using aftermarket parts for repairs.