OK, this is the skinny from someone who has worked as an insurance adjuster since 1985. First, if you are building your car from the ground up, insure the car before tearing it apart. You can even get away with putting collision on the car in most cases ("you want to put collision on that???"). When starting a build that my see street duty, I call and have the car added with comp for glass breakage issues. For the record, I've had cars insured with AAA-Missouri and State Farm. Never had a problem and never had a claim on these cars.
If the work has already been started, the best you can hope for is liability. You can't mention the word racecar, you can't let them see it, and don't even ask questions about ANY kind of competition.
If anything happens that you need to make a claim while the car is insured, just be advised to that they may cover your loss, but they WILL cancel you. Surprised that they will cover you? Remember that they have accepted a premium. They can not deny coverage after the fact. But don't try to claim track damage. Most likely you will need to supply a police report, etc.
Many states are tort states, meaning that if you weren't at fault in the accident, the other company pays. Most likely they won't advised your company of the decals. Just don't anger the adjuster.
About that last statement. I'll relay a little story. About 15-16 years ago I got an assignment to look at a Buick Grand National here in MI. The guy had dated a close friend of mine a few years earlier and had treated her rather poorly.
The car had some minor front end damage that also included the hood. I opened the hood and staring me in the face is a race engine with nitrous. Needless to say, after I got done with the underwriting department, he was no longer insured with the company I worked for.
I've also let some of this stuff slide on other cars, because in my opinion, there was no issue with the loss. DON'T ANGER THE ADJUSTER!
[This message has been edited by Swifster (edited December 05, 2003).]
[This message has been edited by Swifster (edited December 05, 2003).]