Breaking down is a serious inconvenience. However, the cost of the repairs is worse. Many people do not anticipate having to pay for repairs, especially if they have insurance. However, many insurance companies do not cover everything. It is important to know what is covered by your car insurance policy and how other car coverage plans, like mechanical breakdown insurance, can make a difference.
What Is Mechanical Breakdown Insurance?
Comprehensive auto coverage does not include mechanical breakdowns as one might think. Mechanical breakdown insurance(MBI) covers repairs that are mechanical in nature. These breakdowns must be unrelated to auto accident damage. This means that there is an issue with or damage to the mechanical parts of the car, or they have completely broken. Mechanical issues can include things such as:
- Broken heater
- Valve replacements
- Electrical system issues
- Bad brakes
- Transmission failure
These are just a few examples of things an MBI policy can cover.
What Mechanical Breakdown Insurance Covers
When using this type of insurance, there are limitations to what it covers. Mechanical breakdown insurance may not extend to damage that includes corrosion, damage from poor maintenance or incorrectly maintaining your car. Additionally, purposely damaging the vehicle, and normal everyday wear and tear are also not covered under mechanical breakdown insurance. Lastly, if your vehicle sustains mechanical damage from being used in any other way than its proper intention, then the insurance will not cover the damage. Routine maintenance including tune-ups or tire changes and fixes are not a part of this insurance package or any others either. Depending on who you buy insurance through, it may also cover towing and car rentals.
How Much Does Mechanical Breakdown Insurance Cost?
MBI isn’t that expensive when compared with regular car insurance. To give you some examples, we found quotes from New York where an MBI policy for a Ford Edge, Toyota Camry and BMW M3 costs $30 annually. According to a Wall Street Journal study, policies can be around $75 annually with a deductible of close to $400. Keep in mind, more expensive cars or cars with more value ($70,000 and up) may not be covered by MBI plans.
Buy Mechanical Breakdown Insurance Before You Need It
In most cases, mechanical breakdown insurance has to be bought when the car has less than a certain amount of miles but also before a certain time period has passed. This varies by company and policy. Additionally, you can still get mechanical breakdown insurance even if you are leasing a car. Typically, it is only offered on new and leased cars due to the parameters for MBI. For instance, Geico requires that a car be less than 15 months old, either new or leased or have less than 15k miles on it. However, some companies will insure cars that have been on the market much longer and are more lenient on mileage. USAA will cover a car that is up to 10 years old and has up to 110,000 miles. The only downside is that the insurance is usually purchased when the car is initially bought or leased, though this is not always the case. If it must be purchased right away, this means that you will have both the MBI and the car warranty active. To obtain mechanical breakdown insurance, you must see if your car qualifies for it. Some cars may not even qualify, particularly if the car has an extremely high value. This is because fixing the car may be too expensive and would create a loss for the company.
Mechanical Breakdown Insurance vs. Car Warranty
You can encounter a mechanical issue with your car at any time. Without coverage, you will have to foot the bill for anything that may occur, and even with coverage from a warranty or an extended warranty, you might be responsible for some out-of-pocket expenses. An extended warranty functions similarly to that of mechanical breakdown insurance, with a few differences.
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Extended warranties can have limits as to what mechanical issues will be fixed, whereas mechanical breakdown insurance is more inclusive with mechanical issues.
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With an extended warranty, cars will have to be fixed at places approved by the manufacturer/insurer. Mechanical breakdown insurance often provides a wider range of repair services and allows you to use a place of your choosing.
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Both extended warranties and mechanical breakdown insurance vary on plan length. Geico offers mechanical breakdown insurance for seven years or 100k miles on your car. Cars that do not qualify for mechanical breakdown insurance may qualify for an extended warranty, as the qualifications for an extended warranty may not be as strict.
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Paying for mechanical breakdown coverage also differs from paying for an extended warranty. For extended warranties, the full payment is required at the time of purchase, which is great if you have the lump sum on hand or like to get everything paid at once. Mechanical breakdown insurance allows you to pay the premium as time goes on during each policy period.
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Overall, mechanical breakdown insurance is less costly in the long run, but the deductible can be higher. Though deductibles have been as low as $50 and as high as $250, mechanical breakdown insurance has a higher deductible when the plan is of higher quality. In comparison, the average cost of a three-year extended warranty plan is around $1,214. Additionally, extended warranties are less regulated as they do not follow state insurance laws and can be offered by third parties as well as through the manufacturer.
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Mechanical Breakdown Insurance is regulated by state insurance laws and is backed by insurance companies, ensuring quick and speedy repairs.
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Sometimes mechanical breakdown insurance functions more like a warranty. For example, claims can be denied over certain issues and if you have to fix more than one issue at a time, that can cost more, as some mechanical breakdown insurance plans also require you to pay a different deductible for each issue.
Is Mechanical Breakdown Coverage Is Worth It
Deciding on mechanical breakdown coverage requires an honest assessment of your car usage. If your car is new and under warranty, then is it really necessary? If you use a car often, there is a greater chance of a mechanical breakdown.
You also need to examine how much mileage is on the car if you are leasing it and how much you plan to drive over a certain period of time. For MBI to be worth the cost, the total cost would need to exceed the price of the plan and the deductible.
For example, if you pay $75 a year for six years for an MBI plan with a deductible of $250, a breakdown costing you more than $700 would need to happen for it to be worth it. To put repairs into perspective, a new transmission costs around $1,800 to over $3,000 to replace and a broken head gasket costs around $1,400 to fix.
| Repair Costs vs. Savings | |||
|---|---|---|---|
| Repair Type | Repair Cost | MBI Cost (Deductible + 6-year premium) | Savings |
| Head Gasket Repair | $1,400 | $700 | $700 |
| Transmission Replacement | $3,000 | $700 | $2,300 |
It is important to compare whether an extended warranty covers enough parts or if the mechanical breakdown insurance plan covers more. You can also compare the prices of the extended warranty with the MBI plan to see which fits in your budget. You should also assess if you would be able to afford the bill if you sustain damage that is not covered.