The value of your car isn't the only determining factor. Learn more about the many other variables that come into play when shopping for full coverage auto insurance and tips for controlling your costs.
Many people who are interested in full coverage car insurance wonder if it is a good idea to insure their car for mechanical failures. After all, a major breakdown such as a transmission overhaul or engine replacement can set you back substantially if you have to pay for it 100% out of your own pocket.
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But before we get into discussing whether auto repair insurance is the right choice for you, it is important to understand its basics.
What is Auto Repair Insurance?
An auto repair insurance policy, also known as mechanical breakdown insurance or extended vehicle protection, assumes the cost of expensive repairs resulting from mechanical breakdown to major vehicle components (such as transmission, engine, steering gear, brakes etc.). Many reputable insurance carriers offer this service for purchase to existing customers or it can be purchased independently from unaffiliated third party companies.
Each company carries its own contract, so the cost of the service depends on the breadth of the coverage and the duration of the contract. Some contracts, for example, may include the cost of towing assistance and rental reimbursement. The length of the contract varies based on the age of the vehicle as the coverage terminates when the vehicle reaches a specific age or mileage. Sellers of auto repair insurance dictate a window of when this service may be purchased based on age and mileage of the vehicle. Vehicles that are older than 10 years or are in excess of 100,000 miles are usually barred from getting this kind of auto insurance.
Comparing to Vehicle Warranty and Personal Auto Policy
Auto repair insurance typically comes into play after the vehicle’s warranty expires and does not require immediate purchase whereas a warranty comes with the purchase of a new vehicle. Most policies dictate that auto repair insurance policy pays in excess to a vehicle’s warranty, meaning that if the issue can be covered under the warranty, the auto repair policy would not pay.
Auto repair insurance is also different from a personal auto policy. Collision and comprehensive coverage (if purchased on a personal auto policy) pays for repairs to a vehicle when involved in a collision loss with another object, or if it damaged due to a non-collision loss (caused by weather, animal collision, theft, fire, or vandalism). Important: auto repair insurance is not in place for accidental damage and will not cover what collision and comprehensive coverage pays for on a personal auto policy.
How Much Does Auto Repair Insurance Cost?
The cost of auto repair insurance varies based on the company, contract and coverage. A 2017 quote from a reputable insurance carrier on a 2015 Jeep Wrangler, with 35,000 miles yielded several plans. These plans ranged from $1,527.96 for a plan expiring in 4 years or 60,000 miles, to $3,722.53 for a plan expiring at 5 years or 100,000 miles.
The carrier also offered an option to pay for the policy up front or to break it down into 12 or 18-month payments. This is one quote from one carrier, and many other plans are available based on the purchaser’s needs.
Even though a vehicle qualifying for auto repair insurance cannot be more than 10 years old, it does not mean that the auto repair insurance coverage will last for 10 years. The above quote indicated that the coverage would terminate 5 years after vehicle purchase (or at 100,000 miles).
An additional cost to consider is a potential deductible. A deductible is an agreed upon cost in the insurance contract which requires the policyholder to pay a specified amount (typically $250 to $500) towards the repairs. The cost of the deductible is in addition to the cost of the policy, and is what you would personally pay the repair shop when the repairs are complete.
Should I Buy Auto Repair Insurance?
While auto repair insurance can serve as a means to alleviate concerns about an unexpected mechanical breakdown, several things should be considered before purchasing.
Are You Covered Already?
Auto repair insurance may cover many of the same aspects as the vehicle’s warranty or extended warranty, so it may not be cost effective to purchase the auto repair insurance. Before considering purchasing auto repair insurance, compare the expiration of your car’s warranty or extended warranty to the expiration date of the auto repair insurance contract. Both the warranty and the insurance policy may have the same expiration date, which would make the auto repair insurance useless.
At What Stage of Life is Your Car In?
The age and mileage of a vehicle can determine whether purchasing auto repair insurance is worth it’s cost. This coverage is available for older vehicles but comes with specific expiration dates based on age and mileage of the vehicle. The best way to decide if you car is worth getting auto repair insurance for at the stage of life it’s in is to get a quick price quote to get an idea of what the additional cost would be and for how long it will be covered.
Do You have a Mechanic You Trust?
If you don’t have a mechanic you trust, auto repair insurance can act as a quality check on the shops that service your car. A large part of the insurance company’s role during the claim process regards regulating the costs of repairs. Thus, they will often take an active roll in helping you find a mechanic that doesn’t overcharge for their services.
Are You a Car Buff?
One benefit with auto repair insurance is that you can specify which parts of the car you would like to insure. Thus, if you know enough about your car’s make and model, you might be able to predict which parts are most likely to fail and insure only those parts. On the other hand, if you don’t know much about cars, you might feel the need to insure the car bumper to bumper, which could lead to insuring much more of your car than is necessary.
Is Your Time Extremely Valuable to You?
While an insurance company can be helpful during the repair process, they will inevitably slow it down as well. One of the main reasons drivers choose not to buy auto repair insurance is there is inevitably a lot of red tape and extra time between your car breaking down, the mechanic’s repair estimate being approved, the repair happening and the repair being paid for by the insurance company. This is why, if you place a high ticket price on your time, this coverage might not be for you.
As you can see, whether or not auto repair insurance coverage is a wise investment for you depends on many variables. If you are unsure about whether this type of coverage is right for you, finding out how much it will cost you by getting a price quote serves as a good first step in making your decision.