Impact of Extended Warranty on Auto Insurance Rates

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Here's what you need to know...
  • An extended warranty will not impact your car insurance rates
  • An extended warranty for your vehicle may be available through your car insurance company
  • You should always look for applicable discounts when searching for car insurance

Unfortunately, having an extended warranty on your vehicle has no impact whatsoever on your car insurance rates. Car insurance companies don’t even ask about your warranties when you apply for car insurance–they simply don’t care.

The thing is, it doesn’t really make sense that car insurance companies don’t take this into consideration.

After all, having a warranty means that you are going to have any issue with your vehicle taken care of as soon as it arises, which means that you are driving a safer car overall. The insurance companies don’t see it that way, however.

You should not base your decision about purchasing an extended warranty on your vehicle on whether or not you can get a car insurance discount.

An extended warranty can save you thousands of dollars on just one serious problem with your vehicle. It can also cost you a lot to purchase. Weigh the cost of the benefits and decide if an extended warranty is right for you.

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Can I buy an extended warranty from my car insurance company?

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Many people don’t realize it, but an extended warranty is simply an insurance policy for your car. Because of this, you will find that some insurance companies sell warranties, not just for vehicles, but for other products as well.

However, you won’t find just any car insurance company selling warranties. Typically, specialty companies handle this type of insurance. In fact, most companies that sell warranties don’t sell any other type of insurance, although there are a few that do.

If you are interested in purchasing an extended warranty for your vehicle but you aren’t sure how to go about it, talk to your car insurance agent. Even if their company doesn’t provide this type of service, often they will know a company that they can refer you to.

Just because your agent refers you to a specific company doesn’t mean that it is the right company for you.

Give the same due diligence that you would for your car insurance policy and check out A.M. Best, Standard and Poor’s, or other finance rating companies to ensure that the company you choose can pay your claim if you have one.

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Will my extend warranty rates change like my car insurance rates change?

When you buy an extended warranty for your vehicle, you pay a single flat rate that covers you for the term of your policy. Unlike a car insurance company, warranty insurance doesn’t allow you to pay your premiums in monthly or bi-monthly installments.

You will need to have the money to pay for your warranty up front.

Because an extended warranty can cost several thousand dollars, depending on the age of your car and the type of car that you drive, you might want to consider getting a small loan to cover the warranty.

If you are buying a new car, you can usually buy an extended warranty at the car lot and roll the cost into the financing of your vehicle.

Most banks are willing to include the warranty in financing because this increases their chance of continuing to receive payments on your vehicle.

For example, if your transmission goes out, which can cost over $2,000 to fix on your own, there is the chance that you will try to walk away from your loan.

If, however, you have a warranty that allows you to have the transmission fixed for $50, then the chances are that you will get the car fixed and continue to pay on your loan. For the bank, this decreases the risk of a borrower not being able to afford maintenance on their vehicle.

What are some of the things related to my vehicle that can help reduce the cost of my car insurance?

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Even though a warranty won’t reduce the cost of your insurance, there are some things about your car that can.

Insurance companies love a safe vehicle and possibly, if there is an extended warranty available for your vehicle, then it probably has many of the advanced features that an insurance company likes to see.

For example, you can get reduced premiums for having:

  • ABS brakes
  • Driver and passenger airbags
  • GPS anti-theft devices
  • Stability and tractions controls
  • A remote off switch

Not every company offers a discount for all of these things, but many do. Driving a safe car with great safety features will save you money on your car insurance no matter what company you choose.

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