Insuring a project car or kit build while it is under construction

Yes, an unfinished car can usually be insured, but the amount a standard policy will pay is the car's value as it sits, not what you have spent on it. A body on a frame with no engine is worth far less on the open market than the receipts in your folder, and a loose engine on a stand may not be covered at all. Hobbyist and collector insurers sell a "vehicle under construction" endorsement for exactly this problem, and the details of how they set value, what they ask you to document and where the car must be kept decide whether the coverage works.

What a standard policy does with a car that has no engine

A personal auto policy pays for physical damage by formula. In one Allstate auto policy form (ACR65) the insurer's limit is the least of three numbers: the actual cash value of the damaged property at the time of loss, the cost to repair or replace it to its condition at the time of loss, and the limit shown on the declarations page. Another carrier's form, the National General Personal Auto Policy (02107), works the same way: the lesser of actual cash value or the cost to repair or replace with property of like kind and quality, adjusted for depreciation and physical condition.

For a running car, that formula is workable. For a project, "condition at the time of loss" is the whole problem. If your shell has no engine, transmission or interior, actual cash value is what a buyer would pay for a shell with no engine, not what you paid for the parts waiting in your garage. If the car burns, the claim does not reimburse you for the engine you were about to install, unless that engine is a covered part of the vehicle or separately insured.

Custom work is the next trap. The Allstate form defines custom parts and equipment as items permanently installed that alter the appearance or performance of an auto and pays "the higher of $1,000 or the applicable limit" shown on the declarations for that equipment. A $9,000 paint job and a built suspension are not automatically covered at their cost; you have to buy a custom equipment limit that matches them. Our guide to custom parts and equipment coverage explains how that works on a finished car.

Finally, ask whether the insurer will write the policy at all. Some standard carriers decline a car that is not drivable, has no title in your name or has no assigned VIN. Declined or not, you need some way to cover fire, theft and weather while the car sits, even if it is never driven.

Coverage options, from simplest to most specific

The right row depends on how much money is in the car and how long the build takes. For a $2,000 donor car you plan to flip in six months, comprehensive on your regular policy may be all you need. For a $40,000 frame-off restoration over three years, a standard policy leaves most of the investment uninsured.

How the "vehicle under construction" endorsement works

Hagerty's Vehicle Under Construction coverage, which it describes as for vehicles undergoing an active restoration, raises the car's guaranteed value by 10% per quarter, up to a $25,000 increase per policy period, and adds $750 of automotive tools coverage. Hagerty's page notes that the increases reset at renewal: the value returns to the original guaranteed value unless you request an increase and the insurer agrees (Hagerty). The insurer also says it makes the final decision on risk acceptance and that not every coverage is available in every state.

Progressive's consumer page on restoration, which refers to the same coverage under its Progressive Classic Car by Hagerty program, adds three practical details (Progressive):

• Standard auto policies generally do not include restoration coverage; the endorsement is added to a classic car policy, is meant to be temporary, and is removed once the car is fully restored.
• Insurers typically want proof of active restoration, such as photos, videos, receipts, a description of the work completed and a plan with a timetable. The page says tangible progress over time matters more than whether the build is frame-off or frame-up.
• The tool coverage increase carries a $25 deductible, and coverage for spare parts and automobilia is available as an option. The page also says other insurers use different increase schedules or require periodic updates.

Say you insure a project at an agreed value of $30,000 under a policy with this kind of 10%-per-quarter increase. After two quarters, the value rises by roughly $6,000, to about $36,000, because the build has progressed. At renewal the agreed value goes back to $30,000 unless you ask for the new figure to be locked in and the insurer accepts it. Miss that request and a total loss in month 13 pays far less than the car is worth. This is a hypothetical, not a quote; check how your insurer applies the percentage and what it needs to raise the base value.

Agreed value matters because the alternative, stated value, can pay the lesser of the stated figure or actual cash value. Our article on totaled classic and collector cars shows how agreed value, stated value and actual cash value pay differently, and insuring a classic car explains the usage limits that come with them.

Eligibility rules that catch builders off guard

Collector insurers are not a catch-all. Hagerty's agent reference guide, an undated document, lists vehicles under restoration among the types that qualify but also lists conditions: vehicles are not daily drivers, secure and enclosed storage is required, drivers must have a good driving record, there must be a regular-use vehicle for each licensed household driver, and a minimum vehicle value applies, with requirements varying by vehicle type. Treat those as one insurer's published guidelines from a document that may be out of date; every insurer sets its own, and they change.

The practical consequences:

• You need another car. If the project is your only vehicle, many hobbyist programs will not write it.
• A garage is part of the deal. A pole barn, carport or storage unit may or may not qualify. Ask before you buy the policy, not after a fire.
• The value floor and the paperwork. A cheap, ordinary donor car may fall below a hobbyist insurer's minimum value, which leaves you back with a standard policy.
• Driving is limited. Most programs expect limited pleasure use. A project that becomes a street-driven car can fall out of the program if it begins to look like daily use. See modified cars and insurance for how insurers treat heavy modifications.

Parts and tools in the garage

Parts and tools are where most owners assume they are covered and are not. Two separate questions apply.

Parts that are not on the car. A homeowners policy typically excludes motor vehicles from personal property coverage. Some forms go further and define the excluded "motorized vehicle" to include its parts and equipment, as in a homeowners endorsement from AAA for Indiana (AAA homeowners endorsement CO 01 13 06 06). That would put an engine on a stand outside the homeowners policy's reach and outside the auto policy's too, because it is not yet a covered auto. Only the form you own can answer this, so ask your agent in writing whether stored parts for a vehicle are personal property.

Tools. Hand tools and shop equipment may be personal property under a homeowners policy, usually with limits, and high-value tools or business use change that. A build endorsement often includes a small tool limit; Hagerty's is $750. Heavy equipment such as a welder, lift or engine hoist may need to be listed or scheduled separately if you want it covered at full value.

If you buy large parts before the car is ready, such as a crate engine or a body kit, photograph them with serial numbers and keep receipts. Those receipts do double duty. They support the policy's value, and they are what a titling agency will ask for.

Kit and scratch builds: title, VIN and registration

A car built from a kit or from scratch is not a normal used car in the eyes of a motor vehicle department, and your insurer will ask how it is titled. States handle this differently, so treat the two examples below as illustrations of the type of paperwork involved, not a rule for your state.

California. The DMV defines a specially constructed vehicle as a homemade or kit vehicle built for private use. Vehicles repaired or restored with replacement parts, or modified from the original design, are not in that category. The DMV requires an application (REG 343), a Statement of Construction (REG 5036), bills of sale or receipts for major components such as the engine, frame, transmission and body, an electronic Vehicle Safety Systems Inspection certificate, a verification by an authorized DMV employee, and a smog certification (California DMV).

Texas. The state's October 2025 Assembled and Reconstructed Vehicle Manual treats a kit as an incomplete vehicle bought in pieces and assembled by a hobbyist. The vehicle is identified with the VIN assigned on the kit maker's Certificate of Origin. A title application needs evidence of ownership for the body, frame and motor, a rebuilt vehicle statement (Form VTR-61), a safety inspection by an ASE Certified Master Technician (Form VTR-64), VIN verification, photographs and a certified weight certificate (TxDMV manual).

For insurance, three points follow:

1. The VIN comes first. An insurer needs the vehicle identification number to list the car. On a kit that is usually on the manufacturer's certificate of origin; on a scratch build it may be a number your state assigns after an inspection. Until then, a policy may be limited to coverage on the parts or the donor chassis.
2. The paperwork is your build valuation. The same receipts and bills of sale a DMV wants for major components are what an insurer wants to see when setting an agreed value.
3. The title may change what the car is. Our article on insuring a rebuilt-title car covers how a branded title narrows the market for coverage, and a "specially constructed" or "assembled" title can raise similar questions.

Ask your state motor vehicle agency, not a forum, which forms apply to you. Rules and fees change.

Test drives and moving the car

Driving a car on public roads usually requires it to be registered or to carry a temporary permit, and the liability insurance a state demands is tied to the registration. An unregistered, partly built car being driven to a shop or a test loop is a gap between the rules and the policy. Ask the DMV how test drives are handled in your state and ask the insurer whether a policy that is in force will respond to a road test or transport. Trailering the car to a paint shop or machine shop is a separate question: some collector programs offer storage and transportation coverage as an option, and a standard policy may not cover damage on a trailer or at a shop. Ask before the car leaves your garage.

What changes when the build is finished

A finished car is a different risk, and the insurer needs to be told.

1. Finish the title and registration work. Complete the state process for the new title or registration class.
2. Report the completion date and what was done. Provide the final photos and receipts.
3. Reset the agreed value. Replace the temporary "under construction" value with a new agreed value based on the finished car, backed by an appraisal or documented comparable sales.
4. Drop the construction endorsement and add what a finished car needs. Progressive's page says this coverage is temporary and removed once the car is fully restored. Add liability that matches the planned use, collision, and custom equipment coverage where the policy requires it.
5. Review usage. If the car will be driven regularly, check the mileage and use limits on the hobbyist policy.

Questions to ask before you buy

Use this as a script with an agent or underwriter:

• Will you insure the car now, while it has no engine or is not drivable?
• How do you value it today, and how does that value rise as I add work?
• What documentation do you need, and how often?
• Does the increase reset at renewal, and what is the process to keep it?
• Are loose parts, an engine on a stand and tools covered, and up to what amount?
• What storage do you require, and do you accept a detached garage or storage unit?
• Is a road test or transport to a shop covered before registration?
• What happens to the policy when I finish and retitle the car?

Common questions

Can I insure the car before it has a title in my name?

Often not with a standard insurer. Carriers usually want proof that you own the vehicle and a VIN. With a kit, the manufacturer's certificate of origin and your bill of sale are typically the starting documents; ask the insurer which it accepts.

Is a bare shell worth insuring for liability?

Liability matters only when a vehicle is driven or its use creates risk for others. If the car never moves, comprehensive and a storage-style policy usually cover the realistic losses. Once it can drive on public roads, the state's minimum liability rules apply.

Does my homeowners policy cover the car in my garage?

Standard forms exclude motor vehicles, and some define the exclusion to include their parts. Do not assume a homeowners policy covers a project; ask your agent to confirm in writing.

How do I prove what the build is worth?

Keep dated photos, receipts, invoices from machine and paint shops, build sheets and, for a finished car, an appraisal. Insurers set agreed value from documentation, so the file you build now is your claim file later.

What if I never finish the project?

If the project is abandoned, ask the insurer to reduce the coverage to match what the car is worth and to remove the construction endorsement. A policy that costs more than the car is worth is a common reason projects are underinsured or overinsured.

Key takeaways

• A standard policy values an unfinished car at actual cash value as it sits, so parts and labor you have not installed add little.
• A "vehicle under construction" endorsement, such as Hagerty's 10%-per-quarter increase capped at $25,000, raises the value as you build, and the increase can reset at renewal.
• Parts on a stand and shop tools may fall outside both your auto and homeowners policy; ask for coverage in writing.
• Kit and scratch builds need a VIN and a title process that varies by state, and the same receipts support the build's value.
• Tell the insurer when the build is finished, replace the temporary value with an agreed value on the finished car and review the usage limits.