Car insurance is a necessary expense. Even if you are not concerned about your own car getting damaged in a collision, you at least need liability insurance to pay out in accidents that you caused. That said, it is highly recommended that you do get full insurance coverage, as a collision could leave you out of pocket.
But what about basic car repairs? Most people do not expect insurance to cover car repairs. Repairs and maintenance are just something we assume we have to pay for ourselves. If the car is still in its warranty period, the dealer may pay for repairs, but we have to pay up once it is out of warranty. Insurance has nothing to do with it, right?
Well, not quite. You can get car repair insurance, otherwise known as mechanical breakdown insurance (MBI). MBI covers certain repairs, and is the preferred choice for some car owners.
What does MBI cover? Is it worth it?
What does MBI cover?
MBI works more like a warranty than regular insurance. While you pay for it on a monthly basis, as with regular insurance, it does not cover collisions or damage from “acts of God.” Rather, it covers sudden mechanical failures, such as when your engine suddenly packs up.
Transmission failures, problems with suspension, air conditioning or heating problems, are all probably covered by MBI. However, you will have to take care to read the fine print to make sure what a specific car repair policy covers and what it excludes.
What does MBI not cover?
Again, you’ll have to look at specific policies to get exact details, but most MBI plans do not cover breakdowns caused by a lack of maintenance, basic maintenance such as oil changes and tune-ups, and “wear and tear” parts like tires, brake pads, and cooling system hoses.
MBI will also not cover mechanical damage sustained in a collision. That is always the responsibility of collision cover.
All of this may sound no different to an extended car warranty. And, in many ways, they serve the same purpose. So should you choose mechanical breakdown insurance?
The pros and cons of MBI
It can be difficult to separate the pros from the cons when comparing MBI to an extended warranty. While you save in one way, you may lose out in another.
For example, an extended warranty is usually lumped in with the sum paid for by your car loan. This means that it is contributing to the interest accrued while you pay your car off. However, this also means that you get full value of the warranty no matter what. Since you pay for MBI on a month-to-month basis, failure to pay or a decision to end coverage means that all of your premiums paid go to waste.
This can become particularly troublesome if you choose to change insurance. If your new insurance provider does not offer MBI, you are left without coverage despite having consistently paid premiums.
You may be considering starting with a warranty and getting MBI coverage when the warranty period runs down. However, MBI coverage is only available for new or nearly new cars. As such, if you have gotten a warranty already, your MBI will overlap with it.
Another factor that may make you think twice before getting MBI is that your deductible is likely to be higher than that on an extended warranty.
All of that being said, there is one strong reason to consider MBI. The insurance industry is held to a much higher regulatory standard. Car warranties are the subject of many complaints, and you may simply receive better service from your insurance provider.
Whether or not you choose MBI really depends on your circumstances. If you are buying a new car and want to lower the car loan you need, MBI is an excellent choice, even if it means paying a little more each month. On the other hand, if you prefer to lump it in with your car purchase, an extended warranty will suit you better.
Ultimately, mechanical breakdown insurance offers an alternative to warranties. The type of car owner you happen to be will determine what you choose.