Should You Invest in Car Repair Coverage?


Car repairs can be an expensive part of vehicle ownership. A major repair can set you back thousands of dollars. For instance, a rebuilt engine or transmission can cost between $2,500 and $5,000 to replace.

Is insuring against future repairs a waste of money or a good investment?

Everyone who owns a vehicle must carry accident coverage to drive legally. However, these policies do not cover general repairs and maintenance, only damage due to an at-fault accident.

With all vehicles, parts eventually fail and need replacement. Warranties cover new vehicles for a certain number of miles or years. After the warranty’s expiration, you become liable for all repairs.

Car repair or maintenance insurance policies cover repairs beyond the manufacturer warranty and can target, or exclude, certain parts such as an engine or transmission, which are among the most expensive.

What Does a Policy Cover? The policy may cover the cost of only major failures, such as an engine, or it might be more comprehensive and cover most items that break. The specific policy will list the coverage along with a list of exclusions. The fine print can reveal hidden fees, limited coverage, and penalties. Policies often include payout restrictions.

Car Repair Insurance Versus Warranty. A warranty, provided by the vehicle manufacturer, pays for repairs due to defects, not normal wear and tear. Warranties typically last three to five years and can expire as early as 36,000 miles. In many cases, you can purchase an extended warranty at the time you buy the vehicle.

Typically, used vehicles do not have any warranties.

Bumper to Bumper Warranties cover everything except regular maintenance such as oil changes and tires. Coverage includes repairs to the engine, electrical, exhaust, transmission, Drivetrain, and brakes. Warranties do not cover body repair, broken lights, windows, and interior damage.

Insurance Can Lower Ownership Cost. High vehicle repair costs can create financial emergencies for households without adequate savings. Insurance can mitigate the risk of a breakdown derailing your access to transportation.

High Cost. The more comprehensive the coverage, the more expensive the policy. You could pay for insurance for years without using the policy on a new vehicle.  Older vehicles come with higher premiums: The cost of a policy will vary depending on the age, mileage, and condition of the vehicle. Cars less than five years old may only cost a few hundred per year, where a ten-year-old vehicle could cost over a thousand dollars per year.

Deductibles can range from zero to $500 and will affect the price of the policy. However, the amount of coverage and age of the vehicle has a bigger impact on the price of the policy.

Know the Total Out of Pocket Cost. Understanding the coverage and fees will help you evaluate the value of a policy.  Hidden charges can include surcharges, claim fees, processing fees, and taxes on the total repair bill.