Car Repair Insurance: Do You Need It?
If you are in an accident, your auto insurance policy may cover the damage to your vehicle. When it comes to routine repairs, however, you're on your own. That's where mechanical breakdown insurance, also known as car repair insurance, comes in. It will assist in the repair of your vehicle if any of its major components fail, potentially saving you a large repair bill. However, it does not cover everything, is not available on every vehicle, and may overlap with existing coverage. Here's how to tell if car repair insurance is right for you.
What Does Car Repair Insurance Cover?
Some of the same companies that sell regular auto insurance, such as GEICO and Mercury Insurance, also sell car repair insurance.
Coverage varies by insurer, but in general, a policy will cover repairs to the following parts of your vehicle:
- Electrical systems
- Heater and air conditioning
- Cooling systems
- Engine
- Steering system
- Exhaust system
- Fuel systems
- Transmission
Car repair insurance, like other types of auto insurance, typically has a deductible—usually between $100 and $300—that you must pay out of pocket before your insurance kicks in. As a result, it is of little or no use for paying for minor repairs, and it will only cover a portion of larger ones. According to AAA, common car repairs cost between $500 and $600, though some can be much higher.
What Doesn't Car Repair Insurance Cover?
Again, this varies by insurer and policy, but in general, car repair insurance does not cover:
- Oil changes, tune-ups, and tyre rotations are examples of routine maintenance and upkeep.
- Accident-related expenses (which is what the collision coverage on your regular auto insurance policy is for)
- Damages caused by poor maintenance
- Normal wear and tear
- Cosmetic deterioration
- Damages sustained prior to purchasing the vehicle
- Corrosion or rust
Repairs covered by an extended warranty, if you have one, may also be excluded from your policy. If your vehicle requires repairs as a result of a recall, the manufacturer will pay for them, not your auto repair policy.
Limitations of Car Repair Insurance
Purchasing car repair insurance may have some drawbacks. This type of insurance can be difficult to obtain because most companies have strict policy parameters. Payments may take weeks to months to arrive, and claims may be denied at the discretion of the insurance company. Because most policies are customizable, car repair insurance may not cover all of your needs. When you purchase car repair insurance, you may find that you need repairs on a part of your vehicle that is not covered.
Is Your Car Eligible for Car Repair Insurance?
Car repair insurance is typically sold by insurance companies only for vehicles that meet certain age or mileage requirements. You might only be able to get a policy if you buy a relatively new car with few miles on it. If your vehicle reaches a certain age or mileage, the insurer may refuse to renew your policy.
GEICO, for example, only provides coverage for vehicles that are less than 15 months old and have less than 15,000 miles on the odometer. The policy can then be renewed for up to seven years or 100,000 miles, whichever comes first.
Is Car Repair Insurance Worth the Money?
The cost of car repair insurance varies depending on the model and age of the vehicle, the insurer, the specific policy and its benefits, and other factors. A typical annual range is $30 to $100 or more. If you need to use it, you must pay a deductible of $100, $250, or $300. Is this insurance worthwhile?
On the one hand, it may save you a lot of money if you are facing a large repair bill. On the other hand, what are the chances of that happening?
Cars today are more dependable than they were in the past, and if properly maintained, can travel for many miles without requiring major repairs. In many cases, manufacturer warranties cover more parts for a longer period of time.
Ford, 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." The bumper-to-bumper warranty is good for three years or 36,000 miles, and the powertrain warranty is good for five years or 60,000 miles (covering the engine, transmission, and related components).
- Purchasing a car repair policy may be advantageous if your vehicle requires an expensive repair between when your manufacturer warranty expires (say, after three or five years) and when your auto repair insurance can no longer be renewed (say, at seven years).
Alternatives to Car Repair Insurance
It might make more sense to start putting money aside for an emergency fund when you buy the car, which you can use to pay for any necessary repairs after the manufacturer's warranty expires. If you don't need your emergency fund for car repairs, it could be useful for something else.
If you purchased an extended warranty from your car dealer, it may overlap with car repair insurance, covering many of the same repairs after the original manufacturer's warranty has expired. An extended warranty may cover enough items to eliminate the need for car repair insurance. Furthermore, you can pay for an extended warranty by incorporating it into your monthly car payment or in a lump sum if your vehicle is paid off. If you plan to buy a used car and anticipate that it will require repairs beyond the basic warranty provided by the dealership, extended warranties may be beneficial.