Is Auto Repair Insurance Better Than a Car Warranty?

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Nothing can take a bite out of a wallet more than automotive repairs, especially when they are unexpected. A car can experience unexpected breakdowns just as much as regular issues due to aging. When something does go wrong, you can’t simply leave the vehicle sitting in the road or driveway. To avoid having an expensive paperweight, you will need to get it fixed. 

This is when the mounting costs can come in.

To avoid paying more than necessary for automotive maintenance and repairs, many people turn to auto repair insurance. Insurance can offer the potential to give you some major savings on automotive work under the right conditions. 

But it’s important to know when insurance can help and what you may need to do to take full advantage of the policy. More importantly, it also pays to know how it differs from the more common and popular bumper-to-bumper/powertrain and extended warranties vehicle owners use. 

Auto repair insurance works much like any other kind of insurance policy: money gets paid out when certain conditions are met to reduce costs. On paper, this makes auto repair insurance very attractive; you can get money or reimbursement for repair work you’d otherwise have to pay out of your own pocket. 

As with all things in life, things aren’t quite as simple when it comes to how auto repair insurance actually works. The repair insurance is a specific type of policy that pays out under certain conditions. In other words, not all repairs are covered. 

Coverage depends on the part type and the cause of the need for service in the first place. All repair policies spell out these conditions ahead of time, so you will know exactly what is and isn’t covered even before you actually buy the policy. 

Beyond just knowing what auto repair insurance is and what particular policies will cover, it’s also helpful to know how this differs from typical auto insurance. It’s a common assumption that auto insurance and auto repair insurance are one and the same. 

In reality, this is far from the truth.

In order to legally drive your car, you likely have some kind of minimal level of auto insurance covering your vehicle (and yourself). Regular auto insurance essentially covers you in case of an accident or unexpected event that was out of your control. 

Sometimes, auto insurance will pay for repair work to fix damage caused by these things, but it is far from as extensive as a typical car warranty. This is where auto repair insurance differs.

With auto repair insurance, more types of repairs and services are covered under more conditions. You don’t necessarily have to have an accident to get repairs covered. While they aren’t totally comprehensive, covering everything on a vehicle for things as simple as routine maintenance, they kick in more than just general auto insurance.

The difference can best be seen between auto repair insurance and the minimal liability insurance you need to legally drive. Liability insurance, considered a form of auto insurance, doesn’t actually pay out for any kind of repair work.

Instead, it applies to potential legal (and sometimes medical) fees that come up after an accident. So, this kind of insurance wouldn’t be enough to get the cost-saving coverage you’d need on your vehicle.

Given that auto repair insurance deals specifically with automotive repairs and maintenance, this type of insurance has more in common with standard and extended car warranties than normal auto insurance. Both can cover and reduce some automotive costs, but there are also enough differences to know when deciding which option is best for you.

A car warranty is basically an agreement with a manufacturer or a third-party provider to get repair work covered under certain conditions. Like auto repair insurance, these conditions vary and depend on the specifics of the plan. For factory warranties, for example, repairs are only covered with manufacturing and material defects. 

So, you can expect both auto repair insurance and car warranties to have certain advantages and disadvantages over each other. Some people like to have both (especially on new cars with a factory warranty, but you can usually get by with just one depending on what your needs are.

First and foremost, both cover certain types of automotive repairs. In both cases, you can potentially pay less for important services that need to happen in order to get your vehicle going again after a major issue. While the specific conditions of when they pay out actually vary, both options are worth considering when you are looking for a way to keep costs as low as possible.

Second, auto repair insurance and car warranties have costs in order to keep a vehicle covered. In theory, these costs should be less than paying out-of-pocket for repair work, but it’s still something you will need to budget for ahead of time or on a periodic basis. Some insurance and warranty plans also have a certain deductible you will have to pay before coverage will actually start.

Finally, the scope of coverage can be similar between the two. While some warranties are limited to just drivetrains or safety systems, general bumper-to-bumper warranties cover the same range of components as most auto repair insurance policies. In this way, you get fairly comprehensive coverage with either option.

While insurance and warranty coverage are fairly similar in the broad scope of what they cover and how they work, the differences between the two options may help you decide which one is better for your own vehicle. These differences tend to be smaller than the big picture, so you may find some of them to be more important than others.

Here are a few of the key differences:

When it comes to deciding between auto repair insurance and a car warranty, it helps to reflect on what you actually need in terms of coverage. This will largely depend on the vehicle itself. 

If it’s fairly new, for example, you may find that little to no coverage is needed since repair work will likely be limited to routine maintenance for normal wear and tear and unexpected factory defects. 

Older vehicles, however, start to require more work as they age. This is where repair insurance or an extended warranty can make sense.

Auto repair insurance can be a smarter choice if your vehicle qualifies for it. Since payments are made over time, there is less of an initial investment to have it. On the other hand, car warranties take less time to get repair work completed since filing a claim usually isn’t necessary. 

More than anything else, keep an eye on the list of inclusions and exclusions both insurance and warranty policies have. These will tell you how much coverage you really get with each option.

It’s hard to go wrong with either choice, so your ultimate decision may just come down to eligibility, your budget, your vehicle’s maintenance needs, available insurance quotes, the vehicle service contract terms plus any additional coverage, and whatever will ultimately give you good peace of mind.

Do some research and get free quotes to explore your options ahead of time to get the most information possible.