Is Mechanical Breakdown Insurance Worth It?
Car trouble is so often the worst kind of trouble.
Few things can rip a hole in your budget so rapidly and so thoroughly. A new transmission (~$2,500) or rack and pinion (~$1,000) can wipe out a rainy day fund in one cruel clank or clunk. And it's these types of unexpected problems that make mechanical breakdown insurance so tantalizing. (See also: 4 Tips to Save on Car Insurance)
The question, as with most forms of insurance — is the gamble worth it?
What Is Mechanical Breakdown Insurance?
Mechanical breakdown insurance (MBI) can insulate consumers against big-ticket car repair costs. This is not an extended warranty or anything of the sort. Instead, this is a typically inexpensive form of insurance that is subject to the same regulatory controls as other insurance products.
These policies don't cover defects or issues that arise from standard maintenance issues, but they can be a financial lifeline if catastrophe strikes. Consumers tend to pay reasonable premiums (anywhere from $75 and up) and have deductibles ranging from $50 to $500 or more, depending on the details of the plan and the age of the automobile. Insurers favor consumers with newer vehicles or leased models. Those with older cars might be unable to procure MBI.
Some plans also cover things like towing, car rental, and trip interruption. Terms can range from a year to more than a half dozen, or span tens of thousands of miles. Some policies are even transferable, which car owners can use as a selling point when the time comes to unload their vehicles.
“We all have cars, and we all know they end up breaking down,” said Hank Coleman, managing editor at InsuranceQuotes.org. “Insurance is always a hedge against future problems, and MBI can be a really savvy investment depending on your car and your coverage options. There's few policies that can match the universal need that MBI is setup to cover.”
How Does It Work?
While MBI has some built-in safeguards as a legitimate insurance product, consumers should still take great pains to ensure they're getting a policy that meets their unique needs and covers theirs concerns.
Consumers should be able to take their ailing auto to a repair shop of their choice. Avoid policies that try to limit, qualify, or otherwise restrict decisions related to who completes repair work. There should also be clear language explaining that your deductible payments are for visits to the repair shop and not required for every single repair.
Remember, too, that this is breakdown insurance. Car equipment that becomes defective because of normal wear and tear over time isn’t covered. Unless you have a warranty or extended service agreement, things like brake pads, shocks, and other parts will require out-of-pocket outlays.
And what about warranties? Newer automobiles may come with a manufacturer warranty or service agreement that all but eliminates the need for MBI. It’s important to evaluate a potential policy in light of existing warranties and their expirations.
Why Get Mechanical Breakdown Insurance?
For some consumers, it might make more sense to simply tuck away a few extra dollars each month in an auto emergency fund. Those who like having an added layer of protection can shop around for MBI. As an added bonus, those who purchase it when their car is new tend to enjoy lower rates as the years go on.
In the end, though, it’s typically one of those peace-of-mind purchases.