diff --git a/lib/datastore.js b/lib/datastore.js
index 28ab4a4..24902e8 100644
--- a/lib/datastore.js
+++ b/lib/datastore.js
@@ -214,7 +214,7 @@ Datastore.prototype.update = function (query, newDoc, options, cb) {
       if (doc) {
         return cb();
       } else {
-        return self.insert(newDoc, function (err) {
+        return self.insert(model.modify({}, newDoc), function (err) {
           if (err) { return callback(err); }
           return callback(null, 1, true);
         });
diff --git a/package.json b/package.json
index 5a06803..b937cb0 100644
--- a/package.json
+++ b/package.json
@@ -1,6 +1,6 @@
 {
   "name": "nedb",
-  "version": "0.3.1",
+  "version": "0.3.2",
   "author": {
     "name": "tldr.io",
     "email": "hello@tldr.io"
diff --git a/test/db.test.js b/test/db.test.js
index 756c141..a9a4caa 100644
--- a/test/db.test.js
+++ b/test/db.test.js
@@ -464,7 +464,23 @@ describe('Database', function () {
           });
         });
       });
+    });
+
+    it('Can upsert a document even with modifiers', function (done) {
+      d.update({ bloup: 'blap' }, { $set: { hello: 'world' } }, { upsert: true }, function (err, nr, upsert) {
+        assert.isNull(err);
+        nr.should.equal(1);
+        upsert.should.equal(true);
+
+        d.find({}, function (err, docs) {
+          docs.length.should.equal(1);
+          Object.keys(docs[0]).length.should.equal(2);
+          docs[0].hello.should.equal('world');
+          assert.isDefined(docs[0]._id);
 
+          done();
+        });
+      });
     });
 
   });   // ==== End of 'Update' ==== //