Car Repair Insurance: Is It Worth It?

Car repair insurance covers problems auto insurance won’t, but does that make it the best investment for you?

Car repair insurance, also known as “mechanical breakdown insurance” (MBI), primarily covers problems with your car that aren’t covered under basic auto insurance and collision coverage. Engine, electrical or steering malfunctions are usually covered by car repair insurance much in the same way your auto insurance coverage works.

On its face, auto repair insurance may seem like an excellent complement to an auto insurance policy. However, if your car is too new or too old, car repair insurance may not be worth your while. A new car is usually covered under a warranty, making an MBI policy redundant and a waste of money. At the other end, car repair insurance companies often set coverage limits on a car’s age or mileage, leading to your policy being cancelled once either of those limits are hit.

As such, there are some decisions you should make before signing off on a car repair insurance policy. This article will lay out various factors for your consideration so you can make an informed decision. It includes:

Should I get car repair insurance?

An important factor in deciding whether or not to get auto repair insurance is the age and mileage of your car. If you have a brand-new car, it should come with a manufacturer’s warranty which should cover most, if not all, of what a car repair insurance policy would cover. There is no need to have overlapping coverage at that point, and it is a waste of money at best.

On the other end of the spectrum, if your car is too old, you may not have your coverage too long. It’s not uncommon for insurers to provide car repair insurance coverage only up to a certain age or mileage limit. If the insurer’s mileage limit for coverage is 70,000 miles and you see the odometer flip to 70,001 miles, you could see your policy cancelled at that point. The same holds true if your car hits your car repair insurance company’s set age limit.

If you calculate that your car will hit the auto repair insurance provider’s age or mileage limit during the term of your policy, it may not be worth your while to buy it.

Other factors to take into consideration when looking at mechanical breakdown insurance include:

Is your car a long-term investment?

If you plan to buy a new car in the near future, a car repair insurance policy may be an affordable way to avoid unnecessary repair costs on your qualifying current vehicle while you’re saving up for the newer car.

Do your premium and deductible justify getting a policy?

An MBI policy can run you anywhere from $50 to $1,000 annually depending on the age of your car, mileage and policy coverage. If your quote for auto repair insurance is at the lower end and the condition of your car makes it a viable deal, consider signing on the dotted line. If quotes you’re getting are at the higher end of the cost spectrum, consider bulking up your savings account to plan for potential car repairs or getting an extended manufacturer’s warranty, if it’s available.

What does mechanical breakdown insurance cover?

The purpose of a car repair insurance policy is to take care of auto malfunctions not covered by auto insurance. Car insurance covers sudden and accidental damage, such as a car accident. This excludes many other potential problems with your vehicle. To pick up the slack, car repair insurance covers the repair or replacement of car components and systems such as:

  • The engine.
  • Electrical systems, including onboard computers.
  • AC and heater systems.
  • Steering.
  • Fuel and exhaust.
  • Transmission.

MBI coverage exclusions

While a car repair insurance policy may appear extensive in its coverage, there are many issues that may be excluded from coverage. These include:

  • Regular maintenance and upkeep, such as tune-ups.
  • Improper maintenance-related damage.
  • Damage due to accident.
  • Cosmetic wear and tear.
  • Damage covered by a manufacturer’s warranty or extended warranty.
  • Components covered by recall.
  • Non-mechanical components.
  • Rust and corrosion.

Auto repair insurance or extended warranty?

Depending on certain conditions, an extended auto warranty may be a better deal for you than auto repair insurance. There are pros and cons to both that mostly rely on your personal needs.

Personal finances can be a big factor for you. With a mechanical breakdown policy, it is usually added onto your auto insurance policy if you purchase MBI coverage through your current car insurance provider. The cost for the auto repair insurance coverage can be broken down into monthly payments with the rest of your premium in this case. Extended warranties are usually paid in one lump sum.

Another major factor is confidence in the coverage provided. Auto repair insurance is regulated by state law, providing you with some financial backup should your MBI provider stop doing business. Extended warranty providers are not regulated. This requires you to do extensive research to make sure your warranty provider is reputable and has strong financial backing.

Coverage levels are another point of concern. Auto repair insurance may offer extensive bumper-to-bumper coverage. Extended warranties are often limited in their coverage by comparison. Even so, bumper-to-bumper MBI coverage may have fees and penalties, so take that into consideration when judging the two forms of coverage.

An advantage that auto repair coverage offers over extended warranties is additional benefits you may purchase. Some mechanical breakdown insurance companies also offer roadside assistance, trip interruption coverage and reimbursement for a rental car while your vehicle is being repaired.

How does car repair insurance work?

Car repair insurance works very similarly in process to basic auto insurance. Should an incident covered by your MBI occur, you’d file a claim with your provider. It’s not unusual for providers to allow you to choose your own auto repair shop to take care of your claim issues, but they may require pre-authorization of the shop first. Once your shop is approved, you would take your vehicle in and get the required work done. Your car repair insurance provider would then pay the bill for the repairs or replacements, minus whatever your chosen deductible is. Car repair insurance deductibles usually fall in increments of $250, $500 and $1,000.

In closing

Going with an auto repair insurance policy mostly comes down to the age and mileage of your car. After that, your budget and specific coverage needs will influence your decision. It could turn out that an extended warranty may be a better way to go if your coverage needs are few and your car is new enough. Otherwise, having a savings account specifically for auto repair, as well as keeping up on routine maintenance and tune-ups, may be all that you need.

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