What is the Best Car Repair Insurance Company? Choosing the Right Coverage

Unexpected car repairs can be a significant financial burden for any car owner. While car warranties offer initial protection, their expiration can leave you vulnerable to hefty repair bills as your vehicle ages. This is where car repair insurance, also known as mechanical breakdown insurance (MBI), comes into play. But with numerous providers in the market, the question arises: what is the best car repair insurance company for your needs?

This article will delve into the world of car repair insurance, providing you with a comprehensive guide to understand what it is, how it works, and most importantly, how to choose the best company and policy to safeguard your finances from unexpected auto repair costs. We’ll explore key factors to consider, coverage details, and help you make an informed decision to drive with confidence.

Understanding Car Repair Insurance

What is Auto Repair Insurance?

Auto repair insurance, or mechanical breakdown insurance (MBI), is designed to cover the costs of unexpected mechanical and electrical repairs to your vehicle after your manufacturer’s warranty expires. Unlike standard car insurance, which covers damages from accidents, theft, or weather events, car repair insurance focuses specifically on breakdowns due to component failure. It helps pay for repairing or replacing major parts and systems of your car, offering a financial safety net against unforeseen mechanical issues.

It’s important to note that car repair insurance typically doesn’t cover routine maintenance, wear and tear, or damage resulting from accidents. It’s purely for mechanical breakdowns that are not caused by neglect or collisions. Some insurers offer MBI as an add-on to your existing auto policy, while others provide it as a standalone policy, sometimes requiring you to also have comprehensive coverage.

How it Differs from Standard Car Insurance

Standard car insurance, particularly a full coverage policy, includes collision and comprehensive coverage. Collision coverage pays for damage to your car if you hit another vehicle or object, while comprehensive coverage protects against damages from events like theft, vandalism, weather, or falling objects. Liability coverage, a mandatory component in most states, covers damages you cause to others in an accident, and may include medical payments.

Car repair insurance, however, is distinct. It does not cover accident-related repairs or damages from external events. Instead, it acts as an additional layer of protection against mechanical failures that are not a result of accidents or external factors. As Cassie Sheets, a data journalist at Insurify, explains, “Car repair insurance doesn’t cover the same things as collision or comprehensive insurance. It works as an addition to a standard policy rather than a replacement.”

How it Differs from Extended Service Contracts or Warranties

When you purchase a new or used car, it often comes with a manufacturer’s warranty, ensuring coverage for mechanical or electrical defects for a specific period. Once this warranty expires, you might be offered an extended warranty or service contract, often through dealerships or third-party providers.

Car repair insurance shares similarities with extended warranties by covering mechanical and electrical breakdowns. However, there are key differences. Sheets points out, “Car repair coverage works similarly to an extended warranty that you’d purchase through a dealership or third party, except you can cancel it, unlike a warranty, and you can pay month-to-month rather than up front. Extended warranties can cost thousands of dollars, and for certain vehicles, mechanical breakdown insurance is as low as $10 per month.”

Both extended warranties and car repair insurance aim to protect you from costs associated with defects in design or workmanship, not normal wear and tear or neglect. Deciding between an extended warranty and car repair insurance often depends on factors like cost, payment flexibility, and cancellation options. Consulting with an insurance agent can help clarify which option best suits your specific needs, especially if you already have an existing warranty.

Coverage Explained

What Auto Repair Insurance Covers

Auto repair insurance, or mechanical breakdown insurance (MBI), generally covers a wide range of potential mechanical issues that can arise in your vehicle. These typically include failures of major systems and components such as:

Engine: Including parts like pistons, cylinder heads, and the engine block.
Transmission: Covering both automatic and manual transmission components.
Drive Axle: Components that transfer power to the wheels.
Air Conditioning and Heating: System components for climate control.
Fuel System: Parts related to fuel delivery and management.
Electrical System: Including the starter, alternator, and electronic control units.
Cooling System: Radiator, water pump, and related parts.
Steering System: Power steering components and linkages.
Braking System: Anti-lock braking system (ABS) and related parts (excluding brake pads/rotors which are wear items).

It’s crucial to remember that coverage is specifically for mechanical breakdowns due to defects, not for issues arising from poor maintenance, accidents, or wear and tear. The exact list of covered components can vary between insurance providers, so carefully reviewing the policy details is essential.

Common Exclusions to be Aware Of

While car repair insurance provides broad coverage, there are typical exclusions you should be aware of. These exclusions are standard across most providers and policies:

Wear and Tear: Components that naturally wear out over time and usage, such as brake pads, tires, hoses, belts, and filters, are not covered.
Accident Damage: Repairs needed due to collisions, accidents, or external events covered by standard auto insurance.
Theft and Vandalism: These are typically covered under comprehensive car insurance, not car repair insurance.
Pre-existing Conditions: Problems that existed before the car repair insurance policy was purchased are generally excluded. A vehicle inspection may be required before policy activation to identify pre-existing issues.
Routine Maintenance: Regular maintenance services like oil changes, fluid top-offs, tune-ups, filter replacements, and tire rotations are not covered.
Cosmetic Damage: Dents, scratches, rust, or other cosmetic issues that don’t affect the mechanical operation of the vehicle are excluded.
Non-Original Equipment Manufacturer (OEM) Parts: Some policies may only cover repairs using OEM parts or have limitations on aftermarket parts.
Certain Vehicle Types: High-performance vehicles, luxury cars, or collectible cars may have limited coverage options or be excluded altogether.
Commercial Use Vehicles: Vehicles used for commercial purposes like ride-sharing or delivery services may not be eligible for standard car repair insurance.
Neglect or Abuse: Damage caused by neglecting vehicle maintenance or misuse is not covered.

Understanding these exclusions is vital to have realistic expectations about what your car repair insurance policy will and will not cover. Always read the policy documents carefully to be fully informed about the specific exclusions of your chosen plan.

Choosing the Right Car Repair Insurance

Finding the best car repair insurance company and policy requires careful consideration of several factors. It’s not just about finding the cheapest option, but about securing comprehensive coverage from a reputable provider that meets your specific vehicle and financial needs.

Factors to Consider When Choosing a Plan

When comparing car repair insurance plans, focus on these key aspects to make an informed decision:

Eligibility Requirements: Insurers have eligibility criteria based on your car’s age and mileage. For example, Geico requires vehicles to be less than 15 months old and have under 15,000 miles to enroll, with renewal options up to 7 years/100,000 miles. Good Sam, underwritten by Progressive, covers vehicles up to 15 years old with less than 100,000 miles. Check if your vehicle meets the age and mileage limits of the insurer.
Coverage Scope: Compare what parts and systems are covered by each policy. Opt for a policy with broad coverage that includes major components like engine, transmission, electrical, and air conditioning systems. Understand any limitations on specific parts.
Claim Payout Process: Determine how claims are paid. Some companies reimburse you after you pay the repair shop, while others pay the repair shop directly. Direct payment can streamline the process.
Deductible Options: Policies come with deductibles, the amount you pay out-of-pocket per claim. Higher deductibles usually mean lower premiums, and vice versa. Choose a deductible you’re comfortable paying in case of a repair.
Rental Car and Ride-Share Reimbursement: Check if the policy includes rental car or ride-share reimbursement to cover transportation costs while your car is being repaired. This can be a valuable benefit.
Additional Perks: Some insurers offer extra benefits like roadside assistance, trip interruption coverage, or discounts on maintenance services. Consider these as added value.
Company Reputation and Financial Stability: Research the insurance company’s reputation and financial strength. Use resources like AM Best to check their financial ratings. A good rating indicates the company’s ability to pay claims reliably. Look for customer reviews and satisfaction ratings to gauge customer experience.

Note: Be aware that commercial vehicles are often ineligible for car repair insurance, regardless of age or mileage.

Comparing Top Car Repair Insurance Providers

Identifying the “best” car repair insurance company is subjective and depends on individual needs and priorities. However, several reputable companies are known for offering car repair insurance, including:

Geico: Offers Mechanical Breakdown Insurance (MBI) as an add-on to their auto insurance policies for eligible new or leased cars. Known for strong customer service and financial stability.
Progressive: Provides Mechanical Breakdown Insurance through Good Sam for a wider range of vehicle ages and mileages. Also offers Vehicle Protection as an add-on in some states. Reputable and widely available.
Mercury Insurance: Offers mechanical protection plans in select states, known for competitive pricing and various coverage options.
Olive.com: A newer online platform focused on car repair insurance, offering standalone policies in certain states, particularly California, for newer, lower-mileage vehicles. Convenient online experience.
Allstate (Extended Vehicle Care): While marketed as extended vehicle care, it functions similarly to MBI, offering coverage for mechanical repairs with additional benefits like roadside assistance and rental car reimbursement.

When comparing these and other providers, focus on:

Coverage Details: What specific components are covered? Are there coverage limits?
Cost: Get quotes from multiple companies to compare premiums and deductibles for your vehicle.
Customer Service: Research customer reviews and satisfaction ratings to assess the claims process and overall customer experience.
Financial Strength: Check financial ratings from AM Best or similar agencies to ensure the company’s stability.

The “best” company isn’t universally defined but is the one that offers the right balance of coverage, cost, customer service, and financial stability to meet your individual needs and vehicle.

Tips for Selecting the Right Coverage Level

Choosing the right coverage level involves balancing your budget with the level of protection you desire. Consider these tips:

Research Your Vehicle’s Common Problems: Use resources like Kelley Blue Book or online forums to research common mechanical issues for your car’s make and model. This can help you anticipate potential repair areas.
Assess Repair Costs: Use Kelley Blue Book or repair cost estimator tools to get an idea of typical repair costs for common issues in your area. This helps gauge potential financial risks.
Consider Comprehensive Coverage: While potentially slightly more expensive, comprehensive plans offer broader protection, covering more systems and components. This can provide greater peace of mind, especially for older or higher-mileage vehicles.
System-Specific Coverage (If Budget-Conscious): If you want to keep costs down, some insurers may offer coverage for specific systems, such as powertrain (engine and transmission). These are often the most expensive repairs, so this focused coverage can still be cost-effective.
Balance Premium and Deductible: Choose a deductible that you can comfortably afford to pay out-of-pocket. A higher deductible will lower your premium, but you’ll pay more if you file a claim. Find a balance that works for your budget and risk tolerance.

Generally, car repair insurance premiums are relatively affordable, particularly for vehicles in good condition. Opting for a more comprehensive plan might not significantly increase your monthly cost but can provide significantly broader protection.

Costs and Benefits

Understanding Premiums and Deductibles

The cost of car repair insurance varies based on several factors, but understanding premiums and deductibles is key to assessing its value.

Premiums: Premiums are the regular payments you make to maintain your car repair insurance coverage. According to ConsumerAffairs research, average premiums for newer cars range from $100 to $500 per year. Premiums can be paid monthly or annually, and may be bundled with your standard auto insurance payment or paid separately. Insurers can adjust premiums at policy renewal.
Deductibles: A deductible is the amount you pay out-of-pocket per claim before the insurance coverage kicks in. Car repair insurance deductibles are typically lower than standard auto insurance deductibles, often around $250 or $500. Choosing a higher deductible usually results in a lower premium.

How Costs Vary with Vehicle Type and Age

Several factors influence car repair insurance costs:

Vehicle Age and Mileage: Older, higher-mileage vehicles generally have higher premiums because they are statistically more likely to experience mechanical breakdowns. As Ezra Peterson, senior director of insurance at Way.com, notes, “Vehicle age and mileage are essential rating factors, as repair frequency tends to rise as mileage accrues.”
Vehicle Type: Certain vehicle types, like trucks, RVs, or luxury vehicles, may have higher premiums due to potentially higher repair costs for their components.
Coverage Level: More comprehensive coverage with fewer exclusions will typically result in higher premiums compared to basic or system-specific coverage.
Deductible Amount: As mentioned, higher deductibles lead to lower premiums, and vice versa.

If you are seeking to protect a classic or collectible car, you may need specialized classic car insurance, which may include mechanical breakdown coverage tailored for these vehicles.

Calculating the Potential Savings on Repair Costs

To illustrate the potential savings, consider this scenario: You purchase car repair insurance for $150 annually with a $200 deductible. Six months into your policy, your car’s air conditioning fails. A mechanic estimates the repair cost to replace the A/C system at $1,546 to $1,705, based on Kelley Blue Book estimates.

Without car repair insurance, you would pay the full repair cost. However, with insurance, you pay your $200 deductible, and the insurance company covers the remaining balance. In this case, your total out-of-pocket cost would be $275 (six months of premium payments plus the deductible), saving you over $1200 compared to paying the full repair bill. This example demonstrates how car repair insurance can provide significant financial protection against unexpected, costly repairs.

How to File a Car Repair Insurance Claim

Step-by-Step Process for Filing an Auto Repair Insurance Claim

The claim process for car repair insurance is generally straightforward:

Vehicle Inspection: Take your car to a licensed mechanic for inspection once you suspect a mechanical issue.
Inspection Report and Estimate: The mechanic will provide an inspection report detailing the problem, recommended repairs, and cost estimates for parts and labor.
Contact Your Insurer: Call your car repair insurance company. Some claims departments prefer to speak directly with the mechanic. Provide your policy information and details of the issue.
Insurance Authorization: The insurance company will review the mechanic’s report and cost estimate. They may authorize the repair work directly with the mechanic. In some cases, they may send an adjuster to inspect the vehicle.
Repair and Payment: Once authorized, the mechanic will proceed with the repairs. Depending on your policy and insurer, the insurance company may pay the repair shop directly, or you may need to pay and then get reimbursed.

Necessary Documentation and Information

To file a claim, you will typically need:

Insurance Policy Information: Your insurance card or policy number.
Vehicle Information: Vehicle identification number (VIN), make, model, and year.
Mechanic’s Inspection Report: A detailed report from the mechanic outlining the problem, diagnosis, and repair costs.
Repair Estimate: The mechanic’s cost estimate for parts and labor.

It’s common for the insurance provider to communicate directly with the mechanic to verify the diagnosis and repair plan before authorizing work. Having clear documentation and prompt communication with your insurer and mechanic will ensure a smoother claim process.

Pros and Cons of Car Repair Insurance

Advantages of Auto Repair Insurance

Car repair insurance offers several benefits, particularly for certain drivers:

Protection Against Unexpected Repair Costs: The primary advantage is financial protection from potentially large, unforeseen repair bills, providing peace of mind.
Budget Predictability: Replaces unpredictable repair expenses with a predictable monthly or annual premium, making budgeting easier.
Peace of Mind: Reduces stress and worry associated with potential car breakdowns, especially for drivers of older or less reliable vehicles.
Potential Cost Savings: As demonstrated in the A/C repair example, insurance can save you a significant amount of money on major repairs compared to paying out-of-pocket.
Flexibility: Often offers month-to-month payment options and cancellation flexibility, unlike some extended warranties.

For drivers with vehicles outside of their manufacturer’s warranty, especially those who rely heavily on their cars and cannot easily afford large repair bills, car repair insurance can be a valuable safety net.

Potential Downsides and Limitations

Despite its benefits, car repair insurance also has potential drawbacks:

Cost of Premiums: You pay premiums even if you don’t have any covered repairs, which can feel like an added expense if your car remains trouble-free.
Exclusions and Denied Claims: Claims can be denied if the issue is due to wear and tear, pre-existing conditions, neglect, or falls under policy exclusions. Proper maintenance is crucial to avoid claim denials.
Not Always Financially Beneficial: If your car is very reliable and repair costs are minimal, the total premiums paid over time might exceed the repair savings, making it less financially advantageous. As Sheets suggests, “If you can put that money into savings and come up with enough to pay for most repairs, your personal mechanical breakdown insurance premium is probably too high to justify the policy.”
Vehicle Eligibility Restrictions: Age and mileage limits may make older vehicles ineligible for coverage, precisely when they might be more prone to breakdowns.

Before purchasing car repair insurance, carefully weigh the premiums against your vehicle’s reliability, potential repair costs, and your financial ability to handle unexpected expenses.

Customer Reviews and Feedback

Customer satisfaction with car insurance companies, including those offering car repair insurance, can vary. J.D. Power’s 2024 U.S. Auto Insurance Study highlights regional differences in customer satisfaction rankings. For instance, Progressive and Allstate ranked higher in customer satisfaction in California compared to the Mid-Atlantic and Southeast regions.

Customer reviews and feedback can provide insights into a company’s claims handling, customer service, and overall policy value. When considering a car repair insurance company, researching customer reviews can be beneficial, but remember that experiences can vary, and regional performance may differ.

Conclusion

Car repair insurance is not a necessity for every driver, but it can be a prudent financial decision for many. If you own a vehicle past its manufacturer’s warranty, especially an older or higher-mileage car, and want to mitigate the risk of unexpected, expensive repair bills, it’s worth considering.

Sheets concludes, “A mechanical breakdown policy can be a very effective way to manage risk. It can save a consumer from hefty repair bills in exchange for a much smaller monthly premium, and it should be considered when assessing the household insurance needs and budget.”

However, if you have a new car still under warranty, possess substantial savings to cover potential repairs, or drive an exceptionally reliable vehicle, the benefits of car repair insurance may be less significant. The best car repair insurance company for you is the one that provides the right coverage at a competitive price, with strong customer service and financial stability, tailored to your individual vehicle and financial circumstances. Thorough research and comparison are essential to make an informed choice.

Car Repair Insurance FAQs

Is car repair insurance worth it?

Auto repair insurance can be worth it if you have an older or high-mileage car and can find a monthly payment that fits into your budget. It’s a risk management tool to protect against potentially large, unexpected repair costs.

How do I know if I’m eligible for car repair insurance?

Each insurer has its own eligibility requirements, including the maximum age of the car and mileage. Check the specific eligibility criteria of each insurance company you are considering.

Does car repair insurance cover routine maintenance?

No, car repair insurance, like warranties, does not cover routine maintenance services such as oil changes, tire rotations, or tune-ups. It’s designed for unexpected mechanical breakdowns, not regular upkeep.

Can I purchase car repair insurance for a used car?

Yes, you can often purchase car repair insurance for a used car, provided it meets the insurer’s age and mileage requirements. Used car MBI policies are common and can be particularly beneficial.

What should I look for in an car repair insurance policy?

Compare the scope of coverage (what’s included and excluded), deductible options, the insurer’s financial rating and customer reviews, and ensure the policy aligns with your budget and vehicle needs. Focus on comprehensive coverage and a reputable provider.

Tanza Loudenback
Tanza Loudenback is a personal finance expert and a Certified Financial Planner (CFP). She was the founding reporter of Personal Finance Insider, covering topics including taxes, retirement planning, banking, real estate and mortgages, and budgeting. Her work has been featured in WSJ Buy Side, Fortune Recommends, Korn Ferry, TheStreet, Morgan Stanley Wealth Management, and Fidelity. ExperienceTanza was the first reporter on the Personal Finance Insider team. In addition to helping build the vertical from the ground up, she helmed a biweekly advice column answering readers’ personal finance questions and launched a personal finance newsletter. She also published two e-books under the Personal Finance Insider brand.She was the editorial lead on Master Your Money series, a two-year-long Business Insider series providing financial advice to millennials. She managed Master Your Money bootcamp events over the course of the series. While at BI, she also expanded tax coverage to include a guide to the best tax software and commissioned a panel of experts to review all articles. Tanza obtained her CFP license in 2020. She aims to simplify personal finance concepts for readers so that they can make smart decisions with their money. ExpertiseTanza’s areas of personal finance expertise include:- Real estate/mortgages

Taxes
Retirement planning
Small business finances
Banking
Budgeting

Education Tanza is a graduate of Elon University with a degree in print and online journalism, with a minor in Italian studies.