Car Mechanical Breakdown Insurance

June 19, 2013

When you purchase a new or used car, the dealership may offer you mechanical breakdown insurance or an extended warranty. Both are designed to provide repair coverage protection beyond the manufactures standard warranty. However, there are some differences between the two that you should be aware of. Therefore, this article we will discuss the differences between mechanical breakdown insurance and extended vehicle warranties.

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Mechanical Breakdown Insurance vs. Warranty Plans
Car mechanical breakdown insurance is an actual insurance policy that is issued by insurance companies to cover the cost of specified repairs as well as the cost for replacement parts that are covered in the insurance policy. These types of policies are underwritten in much the same way as auto insurance or home insurance policies and they create a direct relationship between the insurance company and the insured, or the customer.

Generally speaking, mechanical breakdown insurance is available on new cars and used cars. However, mechanical breakdown insurance may only be available for used cars that are less than a specified a age have less than a pre-determined number of miles. For example, many mechanical breakdown insurance policies only cover vehicles that are less than 18-months old or have less than 30,000 to 50,000 miles. The actual age of vehicles that are eligible for coverage, and the number of miles for which policies are available, will vary from company to company.

Most mechanical breakdown insurance policies require that you pay a deductible; however, for the most these deductibles are fairly inexpensive. Common deductible amounts for mechanical breakdown insurance policies usually range from $100 to $200 per year.

Depending on the type of mechanical breakdown insurance coverage you purchase, the policy may cover only certain areas or types of repair or may be almost completely comprehensive and cover almost every aspect of the vehicle. The more coverage that you desire for your vehicle, the more expensive the policy will be.

Extended Warranties
Extended warranties work much in the same way that mechanical breakdown insurance policies do, except they are generally pay for all that once--whereas mechanical breakdown insurance policies usually require ongoing premium payments.

Also, extended warranties are usually available for new cars and many used cars. In fact, extended warranties are generally available for vehicles that may not be covered under mechanical breakdown insurance policies. With an extended warranty you may be able to get extended warranty coverage for vehicles that are several years old and have up to about 75,000 miles on the odometer.

Direct Comparisons
Both mechanical breakdown insurance policies and extended warranties provide varying levels of repair coverage for your vehicle. Mechanical breakdown insurance policies offer the convenience of being able to cancel a policy at any time and cease making payments. On the other hand, extended warranties are usually paid for all that once and in advance; therefore, in order to discontinue coverage--you would need to cancel the warranty and then request a refund for a prorated share of the warranty that was not used.

It is hard to determine which type of coverage will be better for a given car and particular individual. Most of the time, whether you choose a mechanical breakdown insurance policy or an extended warranty will simply be up to you. However, you should be aware that if you're buying a new car or a relatively newer model used car that the manufactures warranty will cover most defects and costs of repair during the standard warranty period. Therefore, if you are purchasing additional coverage for a car that probably won't breakdown anytime soon, you might consider using the money that you would spend for mechanical breakdown insurance or extended warranties to pay down the actual loan balance of the vehicle.

In fact, many car industry experts claim that both types of repair coverage are not needed in most cases--especially with newer vehicles. The chances of a new vehicle needing major repairs are slim with today's better made vehicles. Therefore, many industry experts say that you should save that money, and simply pay for the repairs yourself as they are needed.

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Getting Mechanical Breakdown Insurance on Old Cars

When looking to purchase mechanical breakdown insurance, you must understand that most vehicles older than 18 months will not qualify. If your car does qualify, these are the steps to find suitable coverage.

  1. Ask the dealership. If you purchased your used vehicle at a dealership, ask the salesman or finance manager if they offer an extended warranty or a mechanical breakdown insurance policy. Usually they will offer it before you get to ask. If they do not offer, ask if they have some insurance company they can recommend.
  2. Ask your finance company. If you are obtaining a car loan from a bank or finance company, many offer auto repair insurance to add to your loan agreement. This is a good choice if you use a finance company not affiliated with the car dealership or if your purchasing the car from a private seller. They do this to protect their customers over the length of the loan. They will probably request you to have the car inspected by one of their recommended mechanics to list any defects or excessive wear to the vehicle.
  3. Ask your insurance company. Just as finance companies want to protect their customers, many insurance companies offer auto repair insurance for the vehicles they are covering for general coverage. They will also include the amount for the mechanical breakdown insurance into the financing of your regular insurance plan.

No matter where you find your policy or plan, take your time to read what the plan covers, excludes and any restrictions the policy may contain. Many items will not be covered and you might have to use their selected repair shops. They might require you to use a repair facility that is too far and inconvenient for you to use or use a shop that may be less qualified to do the work.

What Does Vehicle Breakdown Insurance Cover?

Knowing exactly what is and what is not covered by mechanical breakdown insurance is important as it does not guarantee you'll never have to pay a mechanic's bill again.

Mechanical, Electric and Electronic Breakdown
Mechanical breakdown insurance covers the repair costs associated with mechanical, electric or electronic breakdown. If your vehicle is experiencing something of this sort, you will either contact the insurance company or the insurance auto repair shop to make an appointment. That is a detail that your insurance company will determine.

Prior Problems
In much the same way that you will have a hard time getting health insurance with a pre-existing condition, you cannot expect to purchase mechanical breakdown insurance for a car with known ailments. Whatever damage has been done to the car previously will be an expense you are responsible for.

What Is Not Covered?
Perhaps the best way to determine what is covered with MBI is to detail what is not covered. As mentioned, breakdowns of the mechanical, electric or electronic systems are covered. The routine wearing down of replaceable parts is not covered. This is because these components wear down over time regardless of mechanical trouble. What is typically not covered with MBI is bodywork, brake or clutch work, contaminated fuel system, batteries and other electrical parts, suspension, sticking valves, distributor cap, spark plugs, wiper blades, bulbs, hoses, cables and the catalytic converter. Any part of the car that has to be replaced at least once during the life of the car is probably not covered. The transmission, on the other hand, if well maintained, can last the life of the car. Should it fail, this would be covered. Other components that are usually covered are the engine block, differential, master cylinders, starter, alternator, water pump, carburetor, prop shaft, etc.

What Must You Pay?
Many insurers that offer mechanical breakdown insurance require you to not only pay your monthly premium and deductible, but 20% of the repair costs. To see if it is worth the money, call your insurance company for their specifications. Do a simple cost/benefit analysis to give you an idea of the kinds of savings you can expect over the long run. Mechanical breakdown insurance is one option of many when purchasing car insurance, only it acts more like an extended warranty. It covers the bulk of repair costs associated with the non-routine breakdown of mechanical, electric or electronic systems in your car. It does not, however, cover the routine wear and tear many of a car's components experience. For details, contact your insurance company and see if this type of extended coverage is worth it for you.

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How Are Mechanical Breakdown Insurance Rates Determined?

The determination of car insurance rates rests on many factors. Mechanical breakdown insurance or MBI, because it is designed as a substitute for a full warranty, will be determined based upon a number of variables as well.

Auto Repair Insurance
Basic insurance coverage does not offer any compensation for standard mechanical repair. Its primary purpose is to protect you from extensive personal injury and property damage liability in the event of an accident. Next to that, you can cover your own car with collision and/or comprehensive coverage with a deductible. Auto repair insurance, on the other hand, is designed to cover periodic repairs that happen even to the safest of drivers. Depending on the insurance, an auto repair shop will be commissioned to do the standard maintenance work on your vehicle.

Determination of Rates
How the rates are determined will depend upon several factors. If the car you are insuring with MBI is brand new, chances are the mechanical repairs it will need are fewer than if it were an older car. Contrastingly, if the car has many miles and wear and tear on it, mechanical breakdown insurance will probably be more expensive as the insurer will expect the car to have a higher likelihood of problems. Just as an insurance company assesses the risk of the drivers they insure, with mechanical breakdown insurance they assess the risk the car itself poses.

Once insured with MBI, it will be your responsibility to maintain the car--especially if it new--according to the manufacturer's specifications. For instance, if you negligently don't maintain a safe oil level and let the engine run dry until it seizes, the insurer might balk at your claim to replace the engine. It is therefore incumbent upon you to keep on top of any basic maintenance not covered by mechanical breakdown insurance. Whatever you can do for the car without the need of mechanical repair can only help to extend the life of your car and increase the chances that the insurer will cover true mechanical breakdowns.

As an alternative to an extended warranty or to cover an older car in the event of mechanical breakdown, mechanical breakdown insurance is an auto insurance option that helps pay mechanical bills. Rates are determined based upon the age and condition of the car. Additionally, if there is research that suggests certain makes and models break down more frequently, that could raise your rate. Check with your specific insurer for all the details. It is your responsibility to find out as much as you can about mechanical breakdown insurance so you know exactly what it covers and what it doesn't. When inquiring about rates, it is best to be honest about your car's condition to get the most accurate quote, but, as with all insurance, you have the choice of shopping around.