What is Car Insurance and is it Worth it?

Key points

• Car repair insurance works similarly to an extended warranty, but there are a few differences.
• This insurance can cover the cost of repairs if your vehicle breaks down, needs replacement parts or has mechanical problems.
• Also called mechanical breakdown insurance, this coverage adds an extra layer of financial protection to your car insurance policy.

If the air conditioning breaks or your vehicle starts having transmission issues, your car insurance won’t pay for the cost of repairs. A standard car insurance policy only covers problems such as accidents, theft and fires, depending on the types of coverage you buy.

Car repair insurance is extra coverage you can buy to pay for car maintenance and repairs. Read on to see if this optional insurance is worth the additional premium payment.

What is car repair insurance?

Car repair insurance covers electric and mechanical breakdowns. Also known as “auto repair insurance” or “mechanical breakdown insurance,” this coverage works similarly to an extended car warranty. It can help you pay for issues related to wear and tear or other common malfunctions, such as a broken air conditioner or an engine failure.

What does car repair insurance cover?

Policies vary, but a standard auto repair insurance policy typically covers your vehicle’s:

• Air conditioning.
• Brakes.
• Cooling system.
• Engine.
• Electrical systems.
• Fuel systems.
• Steering.
• Transmission.

It will cover charges for the damaged vehicle parts or systems as well as the labor costs associated with covered repairs.

What isn’t covered by car repair insurance?

Car repair insurance policies typically won’t cover:

• Damage caused by collisions.
• Regular maintenance costs (oil changes, tune-ups, coolant flushes, etc.).
• Parts that are replaced regularly (tires, brake pads, cooling system hoses, etc.).
• Damages caused by neglect.
• Any repair excluded in your policy.

How does car repair insurance work?

Like regular car insurance, car repair insurance requires you to pay a premium to keep your policy active. It also has a deductible, which is the amount you are responsible for when your car needs a covered repair.

For example, if you have covered damage that will cost $800 to repair and your deductible is $250, your insurer will only pay $550.

It’s worth noting that auto repair insurance is typically only available to those with new vehicles or vehicles with extremely low mileage (such as 12,000 or 15,000 miles). After buying coverage, you might have the option to renew for a certain number of years or up to a certain mileage.

With Geico, for instance, you are eligible to buy mechanical breakdown insurance for a new or leased vehicle that is less than 15 months old and with less than 15,000 miles. You can then renew coverage for up to seven years or 100,000 miles, whichever comes first.

Car repair insurance vs. extended warranties

Compared to auto repair insurance, extended warranties are both cheaper and more limited in what they’ll cover. Extended car warranties are also slightly more widely available than mechanical breakdown insurance.

Here’s a quick rundown of the differences.

Where can I buy car repair coverage?

Although it isn’t widely available, several traditional car insurance providers do offer auto repair insurance coverage, including:

• Progressive.
• Geico.
• American Family.
• Mercury Insurance.

Car repair insurance requirements

The requirements to buy auto repair insurance will depend on the insurer you choose. But generally, there can be age, mileage and vehicle requirements to qualify for auto repair insurance. 

For instance, Progressive requires cars, trucks and SUVs to be 15 model years or newer and have fewer than 100,000 miles to qualify for coverage. Once you have coverage, you have the option to renew up to 18 model years or 150,000 miles.

Should I buy car repair insurance? 

If you’re thinking about buying auto repair insurance, here are some questions to consider:

• How long will this coverage last me?
• What’s the exact process for getting a repair done?
• What exactly is covered? More importantly, what isn’t covered?
• How much will this cost me now, and each time I need to use it?
• Are there additional benefits, like trip interruption or roadside assistance coverage?
• Can I take my car to any shop, or am I limited to certain ones?
• Can I afford the out-of-pocket costs for covered repairs if I don’t buy car repair insurance?

Still not sure? A good insurance broker can help you sort these details out.

“Take a second and call up your insurance broker and say, ‘Hey, I’m thinking about this. Can we talk through hypothetical coverage situations? Or what would you recommend?’” said Brian Haney, an insurance consultant with The Haney Company. “They’ll be able to talk you through that and maybe even give you some pricing pointers.”

“I always try to get clients, in general, to think of what insurance is really supposed to be for,” said Haney. 

Insurance is meant to cover things that have a low probability of happening but that would be financially devastating for you, something that insurers call catastrophic risk. Examples include car crashes, earthquakes and having your car stolen.

“Mechanical breakdown is the function of what happens when you drive. It’s not a catastrophic risk. It’s just car wear and tear,” Haney said.

If you have a relatively new car and are worried about paying for breakdowns, an extended warranty and auto breakdown insurance are both options to consider. Another option is to set money aside, paying out of pocket when repairs arise.