Is Mechanical Breakdown Insurance Worth It?

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Unexpected car repairs can be expensive, especially on newer vehicles that rely on complex computer systems and components. When these systems fail, it can cause sticker shock. A driver may have to pay a mechanic thousands of dollars out-of-pocket to get their ride running smoothly.

One way new car owners can protect themselves against these pricey repairs is to purchase Mechanical Breakdown Insurance. In this article, you'll learn how this coverage can protect your car and your wallet.

What Is Mechanical Breakdown Insurance?

Traditional car insurance pays for damage related to accidents and collisions. Mechanical breakdown insurance (MBI) is different. This optional car repair coverage pays for repairs for mechanical components and vehicle systems that fail. MBIs reimburse drivers for issues that standard insurance policies exclude in their contracts. They won't pay for accident-related damages or problems associated with everyday use.

You can purchase MBI through insurance companies; however, not every insurer offers MBI to their customers. The companies who sell this coverage advertise it as add-ons or riders on traditional policies. Other insurers, like Progressive and 21st Century, sell MBI unwritten by third-party insurance companies.

MBI sounds like a great idea, unfortunately not every driver can sign up for these plans. Insurers restrict which vehicles qualify for this beneficial coverage. These policies are usually available to newer model cars that are less prone to breakdowns. For instance, GEICO only allows drivers with vehicles less than 15 months old and 15,000 miles on the odometer to sign up for this coverage.

Consumer Affairs advises individuals to remember the following tips when shopping for MBI coverage:

  • MBI plans have deductibles, or the costs drivers must contribute before an insurer pays for any covered repairs. The cost varies depending on the policy, but most cost between $0 to $500.

  • Coverage will differ depending on the carrier and plan. The repairs that an insurer pays for will depend upon their contract.

  • MBI doesn't cover all vehicles. Not every automobile or driver is eligible. Under most plans, only new and used cars can receive coverage. Automobiles must be 15 months old or less or have fewer than 15,000 miles.

  • Some insurers offer high-mileage policies MBI for vehicles that have over 15,000 miles.

Most drivers cannot renew MBIs indefinitely. Most are only available for seven years, or 100,000 miles for each eligible vehicle.

What Does MBI Cover?

Mechanical breakdown insurance covers more systems and mechanical parts than warranties that come from manufacturers. This coverage will pay for repairs for the following components:

  • Engines
  • Transmission
  • Fuel system
  • Exhaust
  • Brakes
  • Air conditioning
  • Transmissions
  • Power systems
  • Technical components and computers
  • Steering

What Mechanical Breakdown Insurance Cover Doesn't Cover

Although MBI pays for a wide range of mechanical failures, it doesn't cover everything. For instance, it won't pay for damages or mechanical failures that vehicles incurred before their purchase. They don't pay for breakdowns caused by poor maintenance or upkeep. Additionally, these policies don't pay for accident-related damage, typically handled by standard collision or comprehensive coverage.

Although MBI pays for a wide range of mechanical failures, it doesn't cover everything. For instance, it won't pay for damages or mechanical failures that vehicles incurred before their purchase. They don't pay for breakdowns caused by poor maintenance or upkeep. Additionally, these policies don't pay for accident-related damage, typically handled by standard collision or comprehensive coverage.

MBI doesn't cover routine maintenance or damage caused by normal wear and tear. Here is a brief list of other issues that MBI doesn't pay for:

  • New belts and hoses
  • Intentional damage caused by drivers
  • Damage caused by poor maintenance
  • Tune-ups
  • Filters
  • Spark plugs
  • Coolant and fluids
  • Brake pads, shoes, and linings
  • Suspension alignments
  • Wheel balancing
  • Oil changes and lubrication
  • Spark plugs
  • Tire replacement, repair, and rotation

How Much Does Mechanical Breakdown Insurance Cost?

When calculating Mechanical Breakdown Insurance premiums, insurance companies consider other underwriting factors other than driving history, credit rating, age, or location. They base your MBI premiums on the year and mileage of a vehicle.The cost of MBI is more affordable than extended warranties. Most drivers will pay between $30 and $100 premium for MBI. The price depends on the make, model, year, and mileage of a vehicle.Their deductibles are higher than extended warranties. Most policyholders will pay a $250 - $500 deductible per incident.

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Differences Between MBI and Extended Warranties

Extended warranties and MBI share some similarities: both pay for unexpected repairs on a vehicle. There are some major differences between the two.

What Are Extended Warranties?

Manufacturers offer traditional warranties when a person purchases them as new. These plans require an expensive lump sum investment upfront and last between one and three years. Vehicle owners can expand this plan past its original expiration date with an extended warranty plan. The coverage they provide varies depending on the vehicle's brand and the dealership; however, they usually have select parts they will repair.

Extended warranties have a higher price tag than MBI. They cost between $1,000 and $3,000. Although they are pricey, extended warranties have lower deductibles than MBI. They are also a better choice for higher-priced and older, higher-mileage cars that MBI may not pay.

These warranties won't cover pre-existing damages on used vehicles that occurred before the current owner purchased them. Most warranty companies impose a 30 day/1,000 mile waiting period on automobiles. It allows them to evaluate the car's condition. This step enables them to watch for drivers that bought extended warranties because they need to repair a current mechanical problem.

Once they pass the inspection process, car owners with extended warranties can get their cars repaired once they break down. They are limited to the provider's approved repair shop network. The deductibles, or fees that drivers must pay before their coverage kicks in, are lower than MBI. Some plans don't require one before they'll cover repairs.

How Mechanical Breakdown Insurance Differs from Extended Warranties

According to Consumer Affairs, most MBI is more affordable than extended warranties. Instead of an expensive investment, MBI has lower monthly premiums. MBI also provides more flexibility and broader coverage, depending on the provider. Additionally, MBI covers more systems and mechanical components within the vehicle instead of specific parts.

Drivers can purchase MBIs for newer and gently used vehicles, but few MBIs are available for older, high-mileage cars. Extended warranties provide pay for repairs for automobiles that have over 100,000 miles.

High-value and expensive cars may not qualify for an MBI because of the cost of repairs. Unlike extended warranties, MBI allows vehicle owners to select the repair facilities they want to use. Under an extended warranty, you can only use facilities approved by the insurer. Additionally, you pay for extended warranties with a lump sum of cash.Consumer Affairs advised consumers to consider the following characteristics when purchasing an MBI policy.

  • Supplier differences – Automakers, dealerships, and third-party companies can offer extended warranties. MBIs are products provided by licensed insurers.

  • Payment differences – Drivers pay for extended warranties up front when they purchase their vehicles. The price is added to the car's financing. Most people can purchase extended warranties at later dates from third-party providers. Policyholders pay for MBIs in installments.

  • Deductibles – MBIs also have higher deductibles than extended warranties, although they cost less. They are $250 - $500. Extended warranties have lower deductibles ($0 - $250) and higher costs.

  • Repairs – Extended warranties require drivers to get their vehicles fixed at approved dealerships and repair shops. MBI policies allow policyholders to visit any licensed shop.

Does Standard Insurance Cover Car Repairs?

No. Drivers have to purchase this coverage. Regular policies consist of liability, comprehensive, and collision insurance. They pay for accident-related incidents, not mechanical breakdowns.

Do I Have to Buy MBI as an Add-On to My Insurance or a Separate Policy?

Some insurance companies sell mechanical breakdown coverage as an add-on to standard auto policies. Others don't offer this insurance at all, but you can buy it from a third-party company that does.

Do MBI Providers Have to Approve the Repair Facility I Choose?

No. Insurance companies usually allow you to select the repair shop, but some restrictions may apply. Always ask the insurer about their regulations and coverage before purchasing a policy. You can also comparison shop for insurance using SmartFinancial. Just fill out our form, and we'll send you MBI quotes from local insurers in your area.

Where Can You Get Mechanical Breakdown Insurance?

Several car insurance companies provide MBI auto insurance to their customers. The best ones include:

  • Allstate's Vehicle Service Contract – This coverage protects drivers from paying high repair costs because of mechanical breakdowns. It pays for 100 percent of covered parts and labor after the deductible. Additionally, you can transfer your contract when you resell it. This plan also includes several extras, including towing, emergency road service, rental car reimbursement, and trip interruption coverage.

  • Mercury's Mechanical Protection Plan – This insurance covers the cost of vehicle failures when they breakdown because of engine problems, transmission issues, or faulty electrical systems. The company has several plans, including factory-like protection that covers mechanical and electrical components. It doesn't cover routine tune-ups, non-mechanical issues, vehicle trimming, or molding. This policy also comes with extras like 24-hour Roadside Assistance, Rental Vehicle Assistance, Road Hazard Tire Protection, Nationwide Protection, and other benefits.

  • Olive Mechanical Breakdown Insurance – This company provides mechanical breakdown insurance for California residents. They cover cars with 140,000 miles and less up to 185,000. There is no 30 day/1,000 mile waiting period. The insurance starts at midnight of your first payment. Olive provides three levels of coverage, including its Powertrain, Powertrain Plus, and Complete Care Program.

What to Consider when Purchasing Mechanical Breakdown Insurance

According to The Balance, there are several that consumers should ask when shopping for Mechanical Breakdown InsuranceWhat will the deductible be, and how will it be applied to a claim?

  • How can you submit claims and receive compensation?

  • What are the coverage exclusions on the policy?

  • Can the coverage be transferred after the vehicle is sold to someone else?

  • What repairs are covered?

  • Are there any upfront fees for certain repairs?

  • Can you select the repair shop of your choice or an authorized one?

  • How long can you renew coverage for your vehicle?

  • What happens if you have a problem with your car while traveling?

Is Mechanical Breakdown Insurance Worth It?

According to Value Penguin, for MBI to be worth it, drivers would need to have a breakdown that exceeds the total cost of the plan and deductible. MBI could save them money if they have a mechanical failure unrelated to an accident. If you have a newer car, it is less likely that you'll have breakdowns versus older cars.

Another thing to consider is the expense of your vehicles. Insurance companies don't provide MBI for more expensive or older vehicles. They are also less likely to insure cars with a track record of mechanical failures. For instance, BMW and Mercedez-Benz owners typically turn to extended warranties instead of MBI. Their vehicles are prone to breakdowns, and their owners prefer extended warranties.

Do you need to shop for Mechanical Breakdown Insurance to pay off unexpected repairs for your vehicle? SmartFinancial has you covered. Complete our short form, and we'll provide you with quotes from local insurance companies within your area. You can compare coverages and decide which one best fits your budget. We're the smart, simple way to find insurance.

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