Is Car Repair Insurance Worth It?

What Is Car Repair Insurance?

Car repair insurance or mechanical breakdown insurance is an optional auto insurance policy that covers mechanical issues regular car insurance does not. Coverage often includes similar protection to a manufacturer's warranty or extended warranty. For example, car repair insurance may cover engine or transmission issues, problems with steering or electrical systems and various other mechanical breakdowns you may encounter.

Standard car insurance doesn't cover mechanical breakdowns of your car's parts or systems, unless the breakdown is due to a covered risk, such as an accident that damages your engine.

Unlike extended warranties or vehicle service contracts, MBI is subject to state insurance regulations and typically sold by insurance companies as an add-on to an auto policy. Some banks and credit unions sell car repair insurance too. Extended warranties and vehicle service contracts are usually sold by auto dealers or manufacturers, often when you buy your car, or by third-party providers.

Be aware: Car repair insurance must generally be purchased while your car is still fairly new. For example, Geico's car repair insurance is only available for new or leased vehicles with less than 15,000 miles. Some insurers allow higher mileage limits, so check coverage to be sure.

Learn more: What Does Car Insurance Cover?

What Does Car Repair Insurance Cover?

Exactly what's covered by car repair insurance depends on your policy, but plans typically cover sudden breakdowns of your vehicle's essential parts and systems.

Typically Covered

• Transmission
• Engine
• Drivetrain
• Electrical systems
• Steering systems
• Fuel systems
• Exhaust systems
• Brakes
• Air conditioning

May Be Covered

• Seals and gaskets
• Safety features such as collision warning systems, heads-up displays and backup cameras
• Convenience technology such as cruise control, keyless entry or convertible top motors
• Windshield repair
• Paintless dent repair
• Key/fob replacement

Some car repair insurance plans include extra benefits such as roadside assistance or trip interruption coverage.

MBI plans may be exclusionary or inclusionary. Exclusionary plans typically provide the broadest coverage: The policy covers everything except parts and services that are specifically listed as excluded. Inclusionary MBI plans only cover parts or services specifically listed as covered. Before purchasing any MBI plan, read the contract carefully and make sure you understand what is covered.

Learn more: How to Save Money on Car Repairs

What Does Car Repair Insurance Not Cover?

Typically, car repair insurance doesn't cover:

• Damage due to normal wear and tear, such as worn brake pads
• Damage caused by neglect or failure to maintain the car
• Rust or corrosion
• Non-mechanical or non-electrical parts, such as tires or trim
• Recalled parts
• Preexisting damage
• Routine maintenance, such as oil changes or tire rotation
• Damage from an accident

Even if a part or system is covered by your policy, your car repair insurance company might deny your claim based on how or why the breakdown occurred. For example, your insurer may deny your claim if:

• You can't document that all the required maintenance was performed.
• You made aftermarket alterations to the vehicle.
• You used coolant or other fluids not recommended by the manufacturer.
• A non-covered part or system causes the breakdown of a covered part or system.
• You continue driving after a dashboard warning light alerts you of a problem that may be serious.

Tip: Carefully read the "Exclusions" or "What is not covered" section of a car repair insurance policy before purchasing it. To get the most from your coverage, you'll need to understand the rules of your policy, be diligent about having your car serviced and keep detailed records.

How Much Does Car Repair Insurance Cost?

The cost of car repair insurance varies depending on factors including the coverage you choose, your vehicle and your deductible. Progressive says its plan can be purchased for as low as $12 per month ($144 per year), while Allstate's plan costs as little as $19 per month ($228 per year). Given that these are low-end rates, your costs may be higher.

When weighing the cost of car repair insurance, you should also consider the deductible. The deductible is the amount you pay out of pocket when you have a claim; the insurance company pays the rest. Based on data from Allstate, Geico and Progressive, car repair insurance deductibles generally range from $50 to $250. You may have the option to choose your deductible.

Learn more: What Is a Deductible in Insurance?

Is Car Repair Insurance Worth the Cost?

Car repair insurance can be worth the expense if the policy's premium and deductible are less than the cost of repairing your car. Of course, it's hard to predict when your car might break down, how much it will cost to fix and how much you may have spent on your mechanical breakdown insurance by that time.

Example: Suppose you've paid $144 annually for car repair insurance for three years and have a $250 deductible. If your covered car repair costs more than $682 (your premiums plus your deductible), you'll come out ahead.

You'll get more benefit from mechanical breakdown insurance if you're facing an expensive repair like replacing a transmission, which can cost anywhere from $1,500 to $10,000 and up, according to AutoNation.

For many drivers, the value of car repair insurance isn't just potential savings, but reducing the financial impact of an unexpected repair bill. However, there's also the risk that your car repair insurance claim could be denied, leaving you on the hook for the full cost of repairs—on top of the premiums you already paid.

You may feel a better option is to put the money you would have spent on car repair insurance into your emergency fund. Money in an emergency fund is also for other unexpected expenses, such as a major dental bill, instead of being committed to insurance premiums.

Learn more: What Is an Emergency Fund?

Car Repair Insurance vs. Extended Warranty

Car repair insurance and extended warranties typically cover similar issues, but while car repair insurance is generally only sold for newer cars, extended warranties can usually be purchased for older cars too.

Dealerships often try to sell you an extended warranty (also called a vehicle service contract) when you buy a new or used car. However, you can buy them at any time, and since coverage doesn't kick in until your manufacturer's warranty ends, it can make more sense to wait until the factory warranty is about to expire.

Should I Get Car Repair Insurance?

Keep the following issues in mind when deciding whether to get car repair insurance.

When to Consider Getting Car Repair Insurance

• Your car has known reliability issues. Less reliable cars are more prone to breakdowns that may be covered by car repair insurance.
• Your car is expensive to repair. Some vehicle makes are costlier to repair than others, which could make MBI worthwhile.
• You plan to keep the car for a long time. Purchasing car repair insurance or an extended warranty could help protect you from unexpected repair costs after your vehicle's factory warranty expires.
• You'd have trouble paying for a major car repair. If you don't have a solid emergency fund, car repair insurance could be worthwhile, allowing you to cover essential repairs without financial stress.

When to Skip Car Repair Insurance

• Your car is reliable and inexpensive to repair. If your vehicle is unlikely to break down and repairs are affordable, car repair insurance may not be worth the cost.
• You don't drive much. Low-mileage vehicles suffer less wear and tear, which can reduce the risk of a mechanical breakdown.
• Your car is still under warranty. Car repair insurance typically covers the same issues as the manufacturer's warranty or an extended warranty, so you don't need both.
• You don't plan to keep the car long. If you expect to sell the car before its factory warranty expires, car repair insurance may not benefit you.
• You can afford to cover major car repairs. Consider putting the money you'd spend on car repair insurance toward a car repair savings fund instead.

Learn more: How Much to Budget for Car Maintenance and Repairs

How to Get Car Repair Insurance

Follow these steps to get car repair insurance:

1. Investigate your options: If your car insurance company sells car repair insurance, that's a good place to start, but you should explore coverage from other sources too. Allstate, Geico, Mercury and Progressive are among the major insurance companies offering car repair insurance; you can also check with independent insurance agents. Some banks and credit unions also sell car repair insurance.
2. Compare coverage: Get quotes from at least three providers. Request an actual policy contract and carefully review what's covered and excluded. Also compare deductibles, claims processes and policy terms.
3. Confirm your car's eligibility: Your vehicle's age, mileage and condition can all affect your eligibility for car repair insurance.
4. Apply for coverage: You can typically complete insurance applications online. Once your application is approved, pay your premiums to start your coverage.

Frequently Asked Questions

The Bottom Line

Car repair insurance is one way to cover the cost of a breakdown. Before purchasing a policy, carefully review the specifics of coverage and weigh the cost of insurance against the potential benefit.

Building a solid emergency fund can provide the financial cushion you need to pay an unexpected car repair bill. If your savings fall short, getting a personal loan or a credit card with a 0% introductory annual percentage rate (APR) on purchases are options for spreading out the cost of car repairs so you can get back on the road. Comparing loan fees and interest rates and diligently paying off the credit card balance before the promotional APR ends will help minimize the cost of borrowing for car repairs.