Is Car Repair Insurance Necessary?
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If you're in an accident, your auto insurance coverage may cover the damage to your vehicle. When it comes to routine maintenance, however, you're on your own. That's where mechanical breakdown insurance, often known as car repair insurance, comes in. It will assist with the repair of your vehicle if any of its major components fail, thereby saving you money on repairs. However, it does not cover everything, is not available on every vehicle, and may overlap with existing coverage. Here's how to figure out if auto repair insurance is right for you.
TAKEAWAYS IMPORTANT
- Car repair insurance is available as a stand-alone coverage in addition to your usual motor insurance.
- Major repairs are covered by car repair insurance, but ordinary maintenance and wear and tear are not.
- To be qualified for car repair insurance, your vehicle must be relatively new.
- Although car repair insurance is reasonably priced, it may merely duplicate coverage that you already have.
What Is Covered By Car Repair Insurance?
Some of the same businesses that sell conventional auto insurance, such as GEICO and Mercury Insurance, sell car repair insurance.
Coverage varies by insurer, but in general, an insurance will cover repairs to the following sections of your vehicle:
- Systems involving electricity
- Heater and air conditioning
- Refrigeration systems
- System for steering the engine
- system of exhaust
- Systems for supplying fuel
- Transmission
Car repair insurance, like other auto insurance, usually has a deductible that you must pay out of yourself before your insurance kicks in—usually between $100 and $300. As a result, it is of little or no use for minor repairs, and it will only cover a portion of larger ones. According to AAA, most car repairs cost between $500 and $600, however some might cost much more.
What Isn't Covered by Car Repair Insurance?
Again, this varies by insurer and policy, but in general, car repair insurance does not cover the following:
- Oil changes, tune-ups, and tire rotations are all part of routine maintenance and upkeep.
- Expenses incurred as a result of an accident (which is what the collision coverage on your regular auto insurance policy is for)
- Damages caused by poor maintenance
- Typical wear and tear
- Cosmetic deterioration
- Damages sustained prior to the purchase of the vehicle
- Corrosion or rust
Repairs covered by an extended warranty, if you have one, may be excluded from your coverage. If your car requires repairs as a consequence of a recall, the manufacturer, not your auto repair policy, will cover the costs.
Is Car Repair Insurance Available for Your Vehicle?
Car repair insurance is typically only sold by insurance providers for vehicles that fulfill specified age and/or mileage requirements. You might only be able to get a policy if you're buying a car that's relatively new and hasn't been driven a lot. When your car reaches a specific age or mileage, the insurer may refuse to renew your policy.
For example, GEICO only sells insurance for automobiles that are less than 15 months old and have less than 15,000 miles on the clock. The policy can then be renewed for another seven years or 100,000 miles, whichever comes first.
Is Car Repair Insurance a Good Investment?
The cost of car repair insurance varies depending on the car's model and age, the insurer, the policy's specific benefits, and other considerations. A typical annual range is $30 to $100 or more. You'll have to pay a deductible, such as $100, $250, or $300, if you ever need to use it. Is this insurance, then, worthwhile?
On the one hand, if you're facing a large repair bill, it could save you a lot of money.
On the other hand, what are the chances of that happening?
Cars today are more reliable than they were in the past, and if properly maintained, may go thousands of miles without requiring major repairs. In many cases, manufacturer warranties also cover more parts and for a longer period of time.
Ford's new vehicle limited warranty for 2021 vehicles, for example, states that it will "without charge, repair, replace, or adjust all parts on your vehicle that malfunction or fail during normal use during the applicable coverage period due to a manufacturing defect in factory-supplied materials or factory workmanship during the applicable coverage period." The bumper-to-bumper warranty is good for three years or 36,000 miles, while the powertrain warranty is good for five years or 60,000 miles (covering the engine, transmission, and related components).
If your automobile requires an expensive repair between the time your manufacturer warranty expires (say, after three or five years) and the time your auto repair insurance expires, purchasing a car repair coverage may be advantageous (say, at seven years).
It might make more sense to start saving money for an emergency fund when you buy your automobile, which you can use to cover any necessary repairs after the manufacturer's warranty expires. If your emergency fund isn't needed for car repairs, it can come in helpful for something else.
After the manufacturer's original warranty has expired, an extended warranty purchased from your car dealer may overlap with car repair insurance, covering many of the same repairs.
Final Thoughts
On the surface, car repair insurance does not appear to be prohibitively expensive. However, it may just duplicate coverage provided by your manufacturer's guarantee for the first few years you own your car, and it may expire before you ever have to deal with a big repair issue, especially if you keep your vehicle properly. So, before selecting whether or not to acquire a policy, consider the following factors:
- How long do you intend to keep the vehicle?
- Whether you have a new car warranty or an extended warranty, we can help.
- How much you'll pay in premiums and deductibles over the years if you ever need to file a claim.
- What is covered by the policy—and what isn't
- If your car ever needs a major repair, whether you have enough money set aside to cover it out of pocket.
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