3 Things to Know About Car Repair Insurance

A brand new car is usually covered by an extended warranty, but that warranty may only cover certain things that go wrong and leave you footing the bill on other major vehicle issues. And if you own an older car that's out of warranty and prone to breaking down, what do you do?

In both cases, you can obtain what is known as car repair insurance, also known as mechanical breakdown insurance. To help you decide if this is a coverage that matches your needs, here are some important things to know about these policies.

It Only Covers Non-Accident Vehicle Issues

When you purchase a car repair insurance policy, your coverage only applies to issues that aren't related to an accident. Remember, standard auto insurance provides protection for your vehicle when it's involved in an accident, or when something happens as a result of weather, such as a hailstorm that cracks your windshield.

Auto repair insurance kicks in when something goes wrong, such as your engine seizes and stops working. A new engine or auto repair can cost thousands of dollars. A standard auto insurance policy won't cover that issue.

You Can Customise Your Covered Risks

When you're talking about car repair insurance, a 'covered risk' is simply the specified coverage you want. So for example, you can purchase car repair insurance that only covers your engine, which means if your car suffers an engine issue, the insurance would pay for it. However, if your vehicle's brakes fail, you would foot that bill unless you also added the brake system to your list of covered risks.

One way to avoid having a shortfall in your coverage is to buy an all-inclusive car repair insurance policy. This would cover repairs to all components of your vehicle, and give you peace of mind. An all-inclusive car repair insurance policy is the most expensive you can buy.

It's Usually Cheaper Than a Warranty

According to Consumer Reports, the average cost of an extended warranty is about $1,200. But warranty holders often find that after spending a lump-sum for a warranty, many repair items are not covered. Reading the fine print on an extended warranty may take a translator, and it may also cost you money.

You may shell out a thousand bucks or more for a warranty only to find out that your drivetrain isn't covered. Now, you're out the warranty money and you still have to pay for the repair. That won't happen with a car repair insurance policy. These policies cost less than an extended warranty, and there are no surprises. You get the coverage you pay for, no more, no less. You can also reduce the cost of your insurance by selecting a higher deductible, say $500 instead of $250.