Understanding the Cost of Auto Repair Insurance

Quick answer

• Auto repair insurance, often called mechanical breakdown insurance (MBI), is a policy that covers unexpected car repairs beyond what a manufacturer’s warranty provides.
• The cost varies significantly based on your vehicle’s make, model, age, mileage, and the coverage level you choose.
• It’s typically more affordable than an extended warranty, especially for older vehicles no longer under manufacturer warranty.
• Consider it if your car is outside its warranty period and you want protection against costly, unforeseen repairs.
• Always compare quotes from different providers and understand what’s covered and what’s not.

What to check first (before you buy or change coverage)

Coverage Needs

Before exploring auto repair insurance, assess your current situation. How old is your car? How many miles does it have? Is it still under its original manufacturer’s warranty? If your car is newer and still covered by a comprehensive factory warranty, MBI might be redundant for now. However, as your car ages and mileage increases, the risk of expensive repairs grows, making MBI a more attractive option. Think about your comfort level with potential repair bills.

Deductibles and Premiums

Like most insurance, auto repair insurance involves a premium (what you pay regularly, often monthly or annually) and a deductible (what you pay out-of-pocket for each covered repair). A higher deductible usually means a lower premium, and vice-versa. Consider what you can comfortably afford to pay upfront for a repair when setting your deductible. A very low deductible might sound appealing, but it will increase your overall cost over time.

Exclusions and Limits (general)

No policy covers everything. Auto repair insurance policies typically exclude routine maintenance items (like oil changes, tire rotations), wear-and-tear items (like brake pads, batteries), and damage from accidents, theft, or natural disasters. It’s crucial to read the policy document carefully to understand what components are covered (e.g., engine, transmission, electrical system) and what the maximum payout limits are per repair or per policy term. Some policies may also have mileage or age restrictions.

Claim Process

Understand how to file a claim before you need to. Does the policy require you to use specific repair shops, or can you choose any licensed mechanic? What is the approval process for repairs? Knowing this in advance can save you significant stress and potential hassle when an unexpected breakdown occurs. A straightforward claims process with good customer service is a major plus.

Bundling and Discounts (general)

Many insurance providers offer discounts if you bundle your auto repair insurance with your existing auto or homeowners insurance policies. This can be a simple way to reduce your overall insurance costs. Always ask about available discounts, such as those for low mileage, specific safety features, or loyalty programs.

Step-by-step (simple workflow)

1. Assess Your Vehicle’s Warranty Status

• What to do: Check your car’s owner’s manual or the manufacturer’s website for the exact duration and mileage of your existing factory warranty.
• What “good” looks like: You have a clear understanding of when your manufacturer’s warranty expires.
• A common mistake and how to avoid it: Assuming your warranty is still active without verifying. Always check the official documentation.

2. Estimate Your Risk Tolerance for Repair Costs

• What to do: Think about the most expensive repairs your car might realistically need (e.g., engine, transmission) and determine if you have savings to cover them.
• What “good” looks like: You have a clear picture of your financial comfort zone for unexpected car expenses.
• A common mistake and how to avoid it: Underestimating the potential cost of major repairs. Research common issues for your car model and their typical repair costs.

3. Research Auto Repair Insurance Providers

• What to do: Look for companies that specialize in or offer mechanical breakdown insurance (MBI). This might include traditional auto insurers, independent warranty providers, or even some credit unions.
• What “good” looks like: You have a list of reputable providers to gather quotes from.
• A common mistake and how to avoid it: Only looking at one provider. This limits your ability to compare prices and coverage.

4. Gather Quotes

• What to do: Contact the providers you’ve identified and request personalized quotes. Be prepared to provide your car’s make, model, year, and current mileage.
• What “good” looks like: You have several quotes detailing premiums, deductibles, coverage levels, and any exclusions.
• A common mistake and how to avoid it: Not providing exact vehicle details, leading to inaccurate quotes. Ensure all information is precise.

5. Compare Coverage Details

• What to do: Carefully review each quote. Pay close attention to what components are covered, what’s excluded, any per-incident or per-policy limits, and the deductible amounts.
• What “good” looks like: You can clearly see the differences in coverage between providers.
• A common mistake and how to avoid it: Focusing only on the price. A cheaper policy with poor coverage is not a good deal.

6. Understand the Deductible and Premium Trade-off

• What to do: Analyze how changing the deductible affects the premium for each policy.
• What “good” looks like: You’ve identified a deductible amount that balances your upfront payment comfort with your ongoing premium cost.
• A common mistake and how to avoid it: Choosing a deductible that you can’t afford to pay when a repair is needed.

7. Read the Fine Print (Exclusions and Limitations)

• What to do: Thoroughly read the policy contract, focusing on sections detailing exclusions, limitations, and the claims process.
• What “good” looks like: You understand precisely what repairs are not covered and any conditions for coverage.
• A common mistake and how to avoid it: Skipping the exclusions section. This is where many policyholders encounter surprises.

8. Investigate Provider Reputation and Claims Service

• What to do: Look for online reviews, consumer reports, and ask for references regarding the provider’s customer service and how smoothly they handle claims.
• What “good” looks like: You feel confident that the provider is reputable and has a good track record for customer satisfaction.
• A common mistake and how to avoid it: Choosing a provider with many complaints about claim denials or poor service.

9. Check for Discounts and Bundling Options

• What to do: Ask each provider if they offer discounts for bundling with other policies you have or for specific vehicle features.
• What “good” looks like: You’ve secured the lowest possible premium through available discounts.
• A common mistake and how to avoid it: Forgetting to ask about discounts. You might be leaving money on the table.

10. Make Your Decision and Purchase Policy

• What to do: Select the policy that best fits your needs, budget, and risk tolerance based on your research. Complete the purchase process.
• What “good” looks like: You have purchased a policy that provides peace of mind for unexpected car repairs.
• A common mistake and how to avoid it: Delaying the purchase until after a repair is needed. Most policies have waiting periods before coverage begins.

Common mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
Assuming warranty coverage is unlimited	Paying for repairs that would have been covered by the manufacturer’s warranty.	Always verify your vehicle’s specific warranty terms and expiration dates before purchasing additional coverage.
Focusing solely on the lowest premium	Purchasing a policy with significant gaps in coverage or high deductibles that make it less valuable.	Compare coverage details, exclusions, and deductibles alongside premiums to find the best overall value.
Not reading the exclusions and limitations	Being surprised when a needed repair is not covered, leading to unexpected out-of-pocket expenses.	Carefully read the policy contract, paying special attention to the “Exclusions” and “Limitations” sections.
Misunderstanding the deductible	Choosing a deductible that is too high to afford when a repair is needed, or too low, making premiums high.	Determine a deductible amount you can comfortably pay upfront for a repair and balance it with your premium budget.
Ignoring provider reputation	Dealing with a company that has poor customer service or makes claims difficult to process.	Research provider reviews and their track record for handling claims before purchasing a policy.
Not checking for required maintenance	Having a claim denied because you missed a scheduled oil change or other required service.	Understand the policy’s maintenance requirements and keep meticulous records of all services performed.
Failing to consider vehicle age/mileage	Buying coverage for a new car that’s still under warranty, or skipping coverage on an older, high-risk car.	Tailor your decision to your vehicle’s age and mileage; MBI is often most beneficial for cars outside their factory warranty.
Not understanding claim procedures	Experiencing delays or disputes when trying to get a repair approved and paid for.	Familiarize yourself with the provider’s claims process, including any required authorizations or preferred repair shops.
Buying from an unlicensed provider	Discovering the policy is invalid or the company is out of business when you need to file a claim.	Ensure the provider is licensed and reputable in your state. Check with your state’s Department of Insurance.
Overlooking bundling opportunities	Paying more than necessary by not taking advantage of potential discounts for combining policies.	Ask about discounts for bundling with your existing auto, home, or renters insurance policies.

Decision rules (simple if/then)

• If your car is still under its original manufacturer’s warranty, then you likely don’t need auto repair insurance immediately, because the factory warranty provides similar coverage.
• If your car is more than 5 years old or has over 75,000 miles, then you should strongly consider auto repair insurance, because it’s more likely to experience costly repairs outside of warranty.
• If you have a substantial emergency fund that can cover a $1,000-$3,000 repair bill, then you might opt for a higher deductible or skip coverage to save on premiums, because you can self-insure for smaller amounts.
• If you prefer predictable monthly expenses and peace of mind, then you should choose a lower deductible and accept a higher premium, because this minimizes your out-of-pocket cost per repair.
• If a policy excludes coverage for major components like the engine, transmission, or electrical system, then it’s likely not worth the cost, because these are the most expensive repairs.
• If a provider requires you to use only their affiliated repair shops, then ensure those shops are conveniently located and reputable, because you want choices and quality service.
• If you are considering bundling with your existing auto insurer, then compare their MBI quote to specialized providers, because sometimes bundling offers savings, but not always the best coverage.
• If a policy has a very long waiting period (e.g., 90 days and 1,000 miles), then factor this into your decision, because you won’t have coverage for initial breakdowns.
• If you drive significantly more than the average person, then look for policies with higher mileage limits or no limits, because you’ll reach them faster.
• If you are considering a policy for a luxury or high-performance vehicle, then expect higher premiums, because parts and labor for these vehicles are generally more expensive.

FAQ

What is auto repair insurance?

Auto repair insurance, often called mechanical breakdown insurance (MBI), is a policy that helps pay for unexpected repairs to your vehicle’s mechanical and electrical components after the manufacturer’s warranty expires.

Is auto repair insurance the same as an extended warranty?

While similar in function, they are not the same. Extended warranties are typically offered by the manufacturer, while MBI is often sold by third-party companies or insurance providers. Coverage details and terms can vary significantly.

How much does auto repair insurance typically cost?

The cost varies widely based on your car’s make, model, age, mileage, and the coverage level. You might pay anywhere from $50 to $150 or more per month, but it’s generally less expensive than a manufacturer’s extended warranty.

When should I consider buying auto repair insurance?

It’s most beneficial when your vehicle is nearing the end of its factory warranty period, or if it’s already out of warranty and you want protection against potentially high repair bills for major components.

What types of repairs are usually covered?

Policies typically cover major components like the engine, transmission, drive axle, steering system, electrical system, and air conditioning. Always check the specific policy for a detailed list.

What is usually excluded from coverage?

Common exclusions include routine maintenance items (oil changes, filters), wear-and-tear parts (tires, brake pads, batteries), cosmetic damage, and repairs related to accidents, theft, or environmental damage.

Do I have to use a specific repair shop?

Many MBI policies allow you to choose any licensed repair facility, but some may require you to use approved shops or get pre-authorization for repairs. Verify this before purchasing.

What is a deductible in auto repair insurance?

The deductible is the amount you pay out-of-pocket for each covered repair before the insurance kicks in. You can often choose a higher deductible to lower your monthly premium, or a lower deductible for a higher premium.

Is auto repair insurance worth it?

It can be worth it if you have a vehicle prone to expensive repairs, you want financial protection against unexpected breakdowns, and you can’t comfortably afford major repairs out-of-pocket. It’s a personal finance decision based on your vehicle and risk tolerance.

What this page does NOT cover (and where to go next)

• Specific policy quotes and pricing for your vehicle.
• Detailed comparisons of individual auto repair insurance providers.
• Information on manufacturer-specific extended warranty programs.
• Advice on whether to purchase from a dealership, independent agent, or directly from an insurer.
• Guidance on specific legal or regulatory requirements in your state.