Car Repair Insurance: Do You Need It?

Your auto insurance policy can cover damage to your car if you're in an accident. But you're on your own when it comes to paying for routine repairs. That's where car repair insurance, also known as mechanical breakdown insurance, comes in. It will help pay to fix your car if any of its major parts fail, potentially saving you a hefty repair bill. But it doesn't cover everything, isn't available on every vehicle, and may overlap with the coverage you already have. Here's how to know if car repair insurance makes sense for you.

What Does Car Repair Insurance Cover?

Car repair insurance is sold by some of the same companies that sell regular auto insurance, such as GEICO and Mercury Insurance.

Coverage can vary from insurer to insurer, but generally, a policy will cover repairs involving these parts of your vehicle:

• Electrical systems
• Air conditioning and heater
• Cooling systems
• Engine
• Steering system
• Exhaust system
• Fuel systems
• Transmission

Like other auto insurance, car repair insurance typically has a deductible—generally in the range of $100 to $300—that you have to pay out of pocket before your insurance kicks in. So it's of little or no value in paying for minor repairs, and it will only pay for a portion of larger ones. According to AAA, common car repairs average from $500 to $600, although some can run considerably higher.

What Doesn't Car Repair Insurance Cover?

Again, this can vary from insurer to insurer and policy to policy, but in general, car repair insurance won't cover:

• Routine maintenance and upkeep, such as oil changes, tune-ups, and tire rotations
• Damages related to an accident (which is what the collision coverage on your regular auto insurance policy is for)
• Damages related to improper maintenance
• Everyday wear and tear
• Cosmetic wear and tear
• Damages incurred before you purchased the vehicle
• Rust or corrosion

Your policy may also exclude repairs that are covered by an extended warranty if you have one. If your vehicle needs repairs as the result of a recall, they would be paid for by the manufacturer, not your auto repair policy.

Limitations of Car Repair Insurance

There are potential downsides to purchasing car repair insurance. This type of insurance can be challenging because most companies have strict perimeters on their policies. Payments may take weeks to months to arrive, and claims may be turned down at the insurance company's discretion. Car repair insurance may not cover all of your needs, as most policies are customizable. When you sign up for car repair insurance, you may end up needing repairs on the part of the car that is not insured.

Is Your Car Eligible for Car Repair Insurance?

Generally, insurance companies that sell car repair insurance only do so for vehicles that meet specific age or mileage guidelines. You may only be able to get a policy if you’re buying a relatively new car without a lot of miles on it. The insurer may also refuse to renew your policy once your vehicle reaches a certain age or mileage.

GEICO, for example, offers its policy only for cars that are less than 15 months old and with less than 15,000 miles on the odometer. After that, you can renew the policy for up to seven years or 100,000 miles, whichever comes first.

Is Car Repair Insurance Worth the Money?

The car repair insurance cost will vary based on the model and age of the car, the insurer, the specific policy and its benefits, and other factors. A typical range is $30 to $100 or more a year. If you ever need to use it, you will have to pay a deductible, $100, $250, or $300. So is this insurance worth it?

On the one hand, it could save you a lot of money if you face an enormous repair bill. On the other hand, it's worth asking, what are the odds of that?

Cars today are more reliable than they once were and, if well maintained, can go for many miles without needing a major repair. Manufacturer warranties also cover more parts and for longer in many instances.

For example, Ford's new vehicle limited warranty for 2021 vehicles says it will "without charge, repair, replace, or adjust all parts on your vehicle that malfunction or fail during normal use during the applicable coverage period due to a manufacturing defect in factory-supplied materials or factory workmanship." The bumper-to-bumper warranty is good for three years or 36,000 miles, and the powertrain warranty (covering the engine, transmission, and related components) is good for five years or 60,000 miles.

Alternatives to Car Repair Insurance

What might make more sense would be to start putting some money into an emergency fund when you buy the car that you can use to pay for any necessary repairs after your manufacturer's warranty runs out. If you don't need your emergency fund for car repairs, it may come in handy for some other purpose.

If you purchased an extended warranty from your car dealer, it may also overlap with car repair insurance, covering many of the same repairs after the manufacturer's original warranty has elapsed. An extended warranty may cover enough items to make car repair insurance unnecessary. In addition, you can pay for an extended warranty by rolling it into your car payment or in a lump sum if your car is paid off. Extended warranties may be useful if you are planning to purchase a used car and anticipate it needing repairs beyond the basic warranty from the car dealership.

Frequently Asked Questions

The Bottom Line

On the face of it, car repair insurance isn't expensive. But it might simply duplicate coverage you already have through your manufacturer's warranty for the first few years you own your car and may expire before you ever face any major repair issues, especially if you maintain your vehicle correctly. So in deciding whether to buy a policy, it's a good idea to weigh these factors:

• How long do you plan to keep the car
• Whether you already have a new car warranty or extended warranty in place
• How much you'll pay in premiums over the years and in deductibles if you ever need to file a claim
• What the policy covers—and what it doesn't
• Whether you can set aside enough money to cover a major repair out of pocket if your car ever needs one