December 21, 2019

Mechanical Breakdown Insurance

Mechanical breakdown insurance is an alternative to the extended warranty sold at car dealerships. The coverage may be cheaper, but how does it compare? Read this to find out.

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Car dealers love to sell buyers on the benefits of an extended warranty. But mechanical breakdown insurance (MBI) may be a better—and less expensive—option.

Read on to learn more about MBI and whether it's the right choice for you.

What Is Mechanical Breakdown Insurance (MBI)?

Mechanical breakdown insurance is an extra coverage (or rider) on your auto insurance that pays for auto repairs resulting from a breakdown rather than an accident. Generally, it takes the place of an extended warranty offered by your auto dealer.

Similar to the extended warranty, MBI pays for repairs after the manufacturer's (factory) warranty expires. You can add it to your auto insurance policy if your new or leased car is less than 15 months old and has less than 15,000 miles on it.

MBI can cover most major failures that can happen in your car. There are several levels of coverage, but the basic coverage usually protects:

  • Engine parts (oil pump, water pump, etc.)

  • Drivetrain (part of the vehicle outside of the engine or motor that delivers power to the driving wheels)

  • Transmission

  • Exhaust system

  • Brakes

  • Electrical components (alternator, etc.)

Does traditional auto insurance cover mechanical breakdown?
No. Auto insurance pays for repairs related to an accident, theft, or damage from a fire, storm, deer, or other mishaps. MBI pays for mechanical-related repairs, like the components and systems that make your car run.

What is not covered by MBI?

MBI doesn't cover routine maintenance or wear and tear on a vehicle, such as:

  • Tune-ups
  • Tire issues/rotations/replacement
  • Filter replacement
  • Coolant and fluid replacement
  • Spark plugs
  • Brake pads and linings
  • Damages caused by poor maintenance
  • Repairs required due to an accident (in that case, collision insurance or comprehensive coverage would cover it)

How much does Mechanical Breakdown Insurance cost?

The price of MBI coverage depends on the year, make, and model of your vehicle. If you have an older vehicle, it could cost $30–$75 annually with a $250 deductible.

A newer or more expensive vehicle is more expensive to repair. You may see rates as high as $200–$300 or more per year. And some auto insurers won't offer MBI for some high-value vehicles.

Unlike traditional auto insurance, the cost of MBI coverage isn't impacted by personal information like your age, credit score, driving record, etc.

MBI vs Extended Warranty

MBI and extended warranties cover the same need in different ways. MBI is offered by your insurance company as an added protection. Extended warranties are typically purchased through car dealers.

The coverage also lasts longer. Though limits vary by insurer, MBI coverage is usually renewable for up to 7 years or 100,000 miles (whichever comes first). Extended warranties, on the other hand, expire after 3 to 5 years.

Here are some other key differences:

  • You can cancel MBI at any time to stop coverage to save money. With an extended warranty, you pay the entire cost upfront or as part of your loan amount.

  • Extended warranty coverage often has exclusions that make the service less useful.

  • With an extended warranty, you must bring your car to the dealership or risk voiding the warranty. With MBI, you can use a repair shop of your choice.

  • MBI offers broader coverage than a dealer's extended warranty.

  • Extended warranties from the dealership are generally more expensive than MBI.

  • If you sell your car, MBI coverage may be transferable to the new vehicle owner.

  • Extended warranties are financed through your auto loan, which increases interest and payments.

Auto dealers typically get commission on extended warranties they sell. In other words, they're motivated to convince you the coverage is worthwhile.

A recent Consumer Reports survey estimated that nearly one out of three customers purchase an extended warranty. But 55% didn't use the warranty.

Is Mechanical Breakdown Insurance Worth It?

MBI is less expensive and more comprehensive than an extended warranty. It has fewer exceptions and can be canceled at any time.

Keep reading for some other factors to consider before deciding.

Vehicle Performance
Research your vehicle, or similar vehicles, to know what you can expect from the performance of your car over time. You can use reviews, like Consumer Reports, to learn what issues you might expect in the future.

Your Budget
If a big-ticket part fails on your vehicle, will you have the funds to fix it? You may be better off purchasing MBI if you won't be able to afford the cost when something breaks.

Other Considerations
Before committing to MBI, ask your insurance provider these questions:

  • What are exclusions of the coverage (if any)?

  • What will the deductible be?

  • How can I make a claim?

  • Are there amounts that must be paid upfront?

  • What costs are covered by MBI? Does this include labor costs?

  • Can I use the repair shop of my choice or do I have to go to a specific repair shop?

  • For how long can I renew coverage?

MBI coverage varies by insurer and some companies don't offer it at all. Generally, you'll have better luck with larger insurers like Geico and Progressive. Contact your insurance agent or company for more details and to learn what's included in the coverage.

How to File an MBI Claim

Just as you would with most other claims, you'd file an MBI claim online or by calling your auto insurance company. Here's how:

  1. Report the breakdown to your insurance company
    You must obtain authorization from your auto insurance company before allowing any repairs to begin.

  2. Provide your auto insurance provider with detailed information
    The insurer must also have a chance to investigate your claim before repairs are made. Failure to do so may result in your claim being denied.

  3. Once approved, take your vehicle to a repair facility of your choice
    Be sure to inform the facility that you have MBI insurance and provide your policy number and your insurer's claims department phone number.

Be sure to let the repair facility know that your insurer needs to be contacted with a diagnosis and repair estimate before they begin work on your car.

Once your auto insurance provider hears from them, a claim examiner will decide whether a physical inspection of your car is necessary.

When your car is fixed, you pay the repair facility the amount of your MBI deductible. The insurance company pays the remainder of the bill directly to the repair facility

Bottom Line

MBI can cover most major failures that happen in your car, like transmission issues or electrical system malfunctions. It may be a better alternative to purchasing an extended warranty from your car dealer.

If you're considering MBI, be sure to talk to your insurance agent or company to learn about what is covered, how much it would cost, and if there are any fine print details you need to know.

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