Car repair insurance: Is it worth it?

Mechanic explains vehicle repairs to customer in auto repair shop.Image: Mechanic explains vehicle repairs to customer in auto repair shop.

In a Nutshell

Car repair insurance may help you pay for costly maintenance and damage after your factory warranty expires. But the value of car repair insurance depends on your car’s age, your driving habits and your existing car insurance policy.
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When you bought your car you likely purchased a standard car insurance policy — and you may have gotten an extended warranty to help pay for mechanical issues down the line. But what happens when that warranty expires?

Once your car warranty expires, you’re financially responsible for any repairs going forward, which can be expensive. One way to keep those costs down is by getting car repair insurance — also known as mechanical breakdown insurance.

Car repair insurance serves a purpose similar to that of a vehicle warranty — easing your financial burden if something goes wrong with your car, like a failed engine or blown transmission. But keep in mind that this type of insurance doesn’t cover traditional wear and tear services like oil changes and tire replacement, or damage from an accident.

Before you buy car repair insurance, you’ll want to figure out if it makes financial sense for you. Based on your car’s age, how much you drive and your current financial situation, you may be better off without it. Let’s explore what car repair insurance is, what it covers and who it may be best suited for.

What is car repair insurance?

Car repair insurance, sometimes known as mechanical breakdown insurance, is coverage you can add to your current auto insurance policy to help pay for repairs that aren’t accident-related.

It’s important to note that all car repair insurance policies aren’t created equal — coverage can vary depending on the insurer you choose. And keep in mind that car repair insurance may not be available through every insurance carrier.

Eligibility requirements for car repair insurance vary from one company to the next. For example, Geico limits eligibility to new or leased cars less than 15 months old and with less than 15,000 miles.

AAA provides coverage to vehicles up to 12 years old with up to 175,000 miles on the odometer.

And Olive — a company specializing in vehicle repair plans — covers vehicles up to 10 model years old with up to 140,000 miles on the odometer.

How does car repair insurance differ from an extended warranty?

While it may sound like car repair insurance and extended warranties function in similar ways, they actually work very differently. An extended warranty covers specific types of car repairs over a certain period of time or up to a mileage allotment, while car repair insurance provides ongoing coverage (again, what’s covered can vary) as long as you pay for it.

Before opting for an extended warranty, you’ll want to understand what’s covered. Keep in mind that these types of warranties often come with a hefty price tag — and depending on the type of repair you face down the road, you may still be stuck footing the bill.

What’s the difference between standard car insurance and car repair insurance?

First, while standard car insurance is required by law in most states to financially protect you and your vehicle if it’s in an accident, stolen, or damaged in some other way — car repair insurance is optional.

In addition, standard car insurance covers accident-related damage while car repair insurance covers mechanical problems unrelated to accidents. You can think of it this way.

  • Standard car insurance helps pay for vehicle repairs related to things like collisions, fire or theft. Your policy will not pay for mechanical or equipment repairs.
  • Car repair insurance helps pay for those more-standard repairs and breakdowns that your basic policy won’t, like engine failure or a blown transmission.

Learn more about the types of auto insurance you can buy.

What does car repair insurance cover?

Here are examples of some of the parts and systems covered by car repair insurance:

  • Engine
  • Transmission
  • Brakes
  • Suspension
  • Steering
  • Electrical

Other components may be covered as well. For instance, Olive covers features like the power liftgate, power seat motors, heated seats and heated steering wheels. And Allstate covers amenities like cruise control, keyless entry, collision warning systems, automatic emergency braking technology and blind-spot monitoring systems. It’s important to compare car repair insurance providers for a complete list of coverages.

Car repair insurance doesn’t cover routine service and maintenance or damage caused by accidents.

What companies offer car repair insurance?

A number of companies offer car repair insurance, although they may market it under a different name. Here are some examples.

Geico: Mechanical Breakdown Insurance

Geico offers mechanical breakdown insurance (or MBI) for new or leased cars that are less than 15 months old and have fewer than 15,000 miles. You can renew Geico MBI for up to seven years or 100,000 miles — whichever milestone comes first. Geico’s MBI covers repairs for all mechanical parts of the car (except for maintenance and general wear and tear) after a $250 deductible.

AAA: Vehicle Protection Plan

The AAA Vehicle Protection Plan provides coverage against unexpected repair costs for car owners after their factory warranty expires. AAA offers three protection plans (silver, gold and platinum) with different levels of coverage to fit customers’ needs and budgets. Some of the repair services that all three packages come with include air conditioning and heating, cooling systems, fuel system, and transmission.

Allstate: Long-Term Powertrain Wrap Vehicle Service Contract

The Allstate Long-Term Powertrain Wrap Vehicle Service protects users from out-of-pocket car repairs such as engine, transmission and drive axles in addition to brakes, electrical, steering, cooling and more. Allstate pays for 100% of covered parts and labor after the deductible is paid.

Is car repair insurance worth it?

There are several benefits to buying car repair insurance. It can give you peace of mind knowing that you likely have coverage for an unexpected repair. But like with all warranties, you’ll want to make sure that you know how the repair process works ahead of time, whether you’ll have to pay upfront and get reimbursed, or whether your service provider will pay for the repair.

You may want to consider getting car repair insurance as your car gets older, or if you buy a used car with significant mileage.

But buying car repair insurance might not make sense for a new car. The types of issues that car repair insurance typically covers (like engine, transmission and mechanical) may not come up for quite a while.

And if they do, your existing new-car warranty would likely cover the repair costs.  So at least until your new-car warranty expires, it can pay to save your money and then consider whether buying car repair insurance makes sense for you. 

Car repair insurance alternatives

Car repair insurance isn’t your only option if you want to protect yourself from the cost of unexpected repairs. Here are a couple of alternatives.

Get an extended warranty

An extended warranty — also known as a vehicle service contract — covers the cost of certain repairs. You can purchase it to supplement the coverage provided by your car’s existing manufacturer’s warranty if it’s still in effect. If the manufacturer’s warranty has expired, you can use an extended warranty to get wide-ranging protection.

This coverage doesn’t include routine maintenance like oil changes and tire replacement.  

Build an emergency fund

An emergency fund is a cash reserve that can be used for unexpected expenses.

You can fund this cash reserve by consistently saving money from your paycheck. Another approach is to build this fund using one-time opportunities such as a tax refund.

Next steps

Now that you have a better idea of what car repair insurance is, think about whether it’s a good value for you.

If it is, start by checking whether your current insurance carrier offers car repair insurance or something similar. If it does, request a quote — and be sure to ask for a detailed list of what repairs will be covered. Car insurance companies typically offer similar coverage when it comes to their auto insurance product. But their car insurance repair parameters can vary.

If you don’t think car repair insurance is worth it, don’t worry — there are alternatives. You can consider getting an extended warranty from your car manufacturer or third party before your factory warranty expires. Just like with car repair insurance, be sure to shop around for the best price.

FAQs about car repair insurance

What is mechanical breakdown insurance?

Mechanical breakdown insurance is protection that covers the cost of repairs if your car breaks down or suffers other mechanical problems.

Which type of insurance will pay for repair of your vehicle?

It depends on the situation. Mechanical breakdown insurance covers repair bills associated with unexpected breakdowns and mechanical problems. Collision insurance pays for repairs if your car is damaged in an accident with another vehicle or object.

Is Carshield the only car repair insurance provider?

No Carshield isn’t the only car repair insurance provider. You can get this protection from companies like Geico, Olive, Mercury and others.

About the author: Joe Dyton has been a professional writer specializing in the real estate and insurance industries for 20 years. He has a bachelor’s degree in journalism from Rider University. You can connect with Joe on his website, … Read more.