Mechanical breakdown insurance – Savior or waste?

A boy changing a spare tire.

Is mechanical breakdown insurance worth your money? (CC BY/woodleywonderworks/Flickr)

Since much of the 99 percent can’t afford to buy a shiny, oft-heralded new hybrid car, they’re driving their old gas-guzzlers longer. This means that as vehicles on the road grow older, they become more prone to mechanical breakdown. Enter auto insurance companies, banks and auto dealers with mechanical breakdown insurance. Some believe it is an insurance product whose time has come, yet significant questions exist as to whether the product is worth the money.

Mechanical breakdown insurance or a new car?

Once you’ve driven an average vehicle for well over a decade, car trouble will happen because parts must be replaced. Eventually, auto repair bills will reach four figures, leaving less financially secure vehicle owners with the choice of whether to repair or buy a new (or newer) vehicle. If one has savings set aside for car repairs, great. But the cold, hard fact is that not everyone does this.

Mechanical breakdown insurance is an option some choose. Also referred to as auto repair insurance, it is different from standard auto insurance collision coverage in that breakdown insurance only pays for mechanical problems unrelated to an accident, even after vehicle warranty expiration. Normal wear and tear isn’t covered, but other more catastrophic repairs named in the policy are covered. Thus, reading the fine print before sign-up is advisable. Consider what coverage is offered, the condition of your car and whether the premiums fit your budget.

Mechanical breakdown insurance typically covers these

In most cases, a standard mechanical breakdown insurance policy covers:

  • Engine parts, from oil pump to water pump
  • Drive train
  • Transmission
  • Exhaust
  • Brakes
  • Electrical parts, such as the alternator

Upper-tier breakdown insurance may cover additional parts of the car at added expense. Such areas as steering, air conditioning and fuel system are among the more popularly covered areas. Towing, rental coverage, 24-hour roadside assistance and lock-out service may also be covered by auto repair insurance. Check with your standard auto insurance policy and vehicle warranty to make sure you aren’t paying for the same service twice.

What does mechanical breakdown insurance cost?

This will vary by geographic region, vehicle and insurance provider (not your driving record or personal credit), but you should expect to pay as little as $300 to as much as several thousand dollars per year. Some car dealers will bundle the insurance into auto loan payments. Deductibles of $100 to $200 are reportedly common, although no deductible coverage is available at a higher premium rate. One nice feature is that if there are billing disputes involved in repair, they’re handled by the insurance company.

Auto repair insurance – The verdict

If you have an older car with complex systems that require more expensive repair, mechanical breakdown insurance can be a good idea. If you plan to keep that car for more than a year or two, the added protection of this insurance policy could be worth your while. However, if you are good at saving money for a rainy day and will only briefly have a car that is relatively simple and inexpensive to repair, mechanical breakdown insurance may be unnecessary.


Money Crashers
Wall Street Journal

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