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There are a number of avenues you can go down in order to purchase car repair insurance. Each has their pros and cons to them.
You should do your homework before you go down the road of buying a secondary tier type of insurance, like car repair.
There are many factors and emotions that impact why and when we purchase certain types of insurance. Home, health, life, and car insurance all seem to make sense to the majority of us.
When it comes to secondary tier type of insurance covers, like car repair insurance, we sometimes balk at the idea. One should examine thoroughly the who, what, where, when, and why of any policy we buy, but especially when we are discussing car repair insurance.
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What does a car repair insurance policy cover?
Car repair insurance policies can be separated into two types: breakdown and wear-and-tear. Some policies combine both into a single package at a single price, while other companies split them into two policies in order to offer reduced rates on one or the other.
Keep in mind as we discuss both types of coverage that you need to understand each one. You don’t want to decide on just breakdown coverage and find out something else is not covered because it’s considered wear-and-tear.
Breakdowns are considered mechanical malfunctions of parts that are otherwise in normal operating condition. For example, your steering column is something that generally lasts the lifetime of a car and will never need to be replaced.
But if yours fails for some inexplicable reason, your breakdown coverage will pay for its replacement.
To differentiate breakdown from wear and tear, think of parts on your car that are not normally replaced, ever. These are things like axles, gas tanks, engine mounts, and so on.
Under wear and tear coverage, you are taking care of things that normally wear out over time. These are things that are commonly replaced on our vehicles at least once, if not more often.
Wear-and-tear coverage would cover things like water pumps, breaks, shocks, and struts, etc. Wear-and-tear tends to be the more expensive of the two types of coverage because payouts are much more frequent.
How much more expensive would it be to combine both coverages?
It’s difficult to give cost estimates in this article due to the fact that there are so many different companies providing this insurance, and it’s largely based on the age and condition of your vehicle.
But we are pretty confident in saying that combining both coverages into one policy will cost you more than purchasing one type or the other. Whether or not you need both types of coverage depends on your comfort level.
For example, there are many do-it-yourselfers who know how to replace their own brakes and do other minor repairs. For them, wear-and-tear coverage is probably not necessary.
On the other hand, there are those whose knowledge of cars consists of nothing more than turning the key and putting the vehicle in gear. For them, wear-and-tear insurance is almost a necessity.
At the end of the day, it comes down to whether or not you want to pay someone else to do everything for you, or whether you’re willing to cover the cost to do it yourself.
Can the manufacturer sell me repair insurance?
Yes, this is called a manufacturer’s extended warranty. Nowadays, most new vehicles come with some sort of manufacturer’s warranty. The warranties range from 3 years/ 36,000 miles to 5 years/ 60,000 miles, generally.
You can get extended warranties that can be for 10 years/ 100,000 miles but make sure you read what is actually being covered.
Also, understand that the warranty lasts either the number of years you have the car or when your odometer reaches a certain mileage marker, which ever comes first.
So if you know that you put a lot of mileage on your car (say 25,000+ miles a year) you may want to extend your warranty to say from the 3-year/36,000 miles warranty to a 5-year/60,000 mile warranty, if possible.
Otherwise, in this scenario, you will barely have a year and a half with the basic warranty by the time you reach 36,000 miles.
Conversely, if you are a low mileage driver (under 10,000 miles per year), you may not ever need to extend the warranty and simply know you have X amount of years until you no longer have coverage.
A manufacturer’s warranty is usually the most reliable, provides only manufacturer’s parts, and is not an out of pocket expense because it’s worked into the pricing of the vehicle.
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Can I get car repair insurance from a car dealer?
Yes, but don’t confuse this type of car insurance with the manufacturer’s warranty described above. If you are buying a used vehicle from a dealer, they most likely will offer you an “extended warranty” on the vehicle.
Understand that this is a marketing tactic and not like a manufacturer’s extended warranty, but a third party insurance provider being sold by the automotive dealer. It is repair insurance, but they are acting as the middleman in this case.
This usually results in higher pricing for this type of car repair insurance.
Since the insurance is not affiliated with the vehicle, if this 3rd party car insurance company goes out of business, you will be in a rough position if your car breaks down.
Most dealers will cover these expenses if this were to occur but please read the fine print with all these repair insurance policies before you make the assumption that you are covered no matter what.
What is 3rd party car repair insurance?
There are three tiers of repair insurance products:
- Manufacturer’s warranty
- Dealer warranty
- 3rd party car repair
If you think of them in terms of health insurance, then the following analogies apply.
A manufacturer’s warranty is like PPO coverage. You will be covered for many factors, and don’t need to wait to see if that procedure or doctor is covered under your policy. You simply go to the manufacturer and ask them to fix the issue with your car and they do it.
Dealer insurance is like a good HMO.
You still can get great service, but you may need to make sure what is exactly covered in the plan.
3rd party insurance can be like a very strict HMO. With some polices, you may need to wait for permission to go ahead with a repair because the insurance company is questioning the validity of the repair with the automotive shop.
Also, with the 3rd party, there is sometimes an immediate out of pocket expense by you first. You then file a claim with your insurance company, which can take as long as a couple of months to get a reimbursement check if the company is not on top of things.
So should I get car repair insurance?
That depends on you, the condition of your vehicle and your economic situation. Some would say buying an extended warranty from any party is a waste of money.
If you are not good about putting aside money for the day your car breaks down, then maybe repair insurance is good for you.
Whatever you do, make an informed decision and read up on all the pros and cons of such an insurance product.
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