Mechanical Breakdown Insurance…is it worth it?

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Mechanical breakdown insurance can be a great theory. Image from Wikimedia Commons.

Mechanical breakdown insurance can be a great thing…in theory. Image from Wikimedia Commons.

There is such a thing as mechanical breakdown insurance, which is exactly what it sounds like. It’s insurance you buy in case your car doesn’t start, runs rough, or explodes…but is it worth buying?

Mechanical breakdown insurance just like any other

Insurance is insurance, period; regardless if it’s mechanical breakdown insurance, flood insurance, house insurance, Jennifer Lopez insuring her derriere, David Lee Roth reportedly insuring his…we’ll say Dodge Viper…whatever.

What makes it worth it is how often you need it, or in other words, an economy of scale. Mechanical breakdown insurance, also called car repair insurance, is kind of like health insurance for your car. You buy a policy, which covers mechanical failures outside of normal wear and tear. If you need to go to the shop, they will pay the provider or reimburse you for what you pay out of pocket after the deductible.

Coverage varies

Coverage involved in mechanical breakdown insurance (often called “MBI”) varies. For the most part, it’s like a warranty in that it’s bumper-to-bumper. Anything that goes wrong is paid for by the insurer after deductible, aside from oil changes, manufacturer recommended service, tires, fluids and wiper blades.

Some insurers, according to Bankrate, will only cover new cars – such as GEICO, who will only offer it those with cars 15 months/15,000 miles or newer.

Generally, the term is between five to seven years or 100,000 miles, whichever comes first. Some insurers will offer MBI for used cars, some don’t. Deductibles will usually be higher for used cars, however the average is between $200 and $400, according to the Wall Street Journal. Some policies cost as little as $75 per year. Some policies are through auto insurance companies and thus the premiums can be included in monthly payments.

Policies, once purchased, can be renewable after the term, depending on the insurer. Some are transferable from vehicle to vehicle. Again, coverage varies, so if one is interested, one should check out available policies.

Pros but also cons

A benefit of mechanical breakdown insurance is that buyers aren’t restricted from where they can take their vehicles for repair, which warranties (the HMOs of the automotive world) do.

Also, since it’s an insurance product, there are state and federal regulations involved (even state insurance guarantee funds, depending on which state you live in), meaning malfeasance is less likely…and some dealership service centers are known for it. Policy sellers are often insurance agents (which require licensure), banks/credit unions and so forth, instead of “Nicky Bananas and Tony The Wrench’s Discount Auto Emporium of Joysey.”

Cons, of course, are that you may pay premiums for years without using or needing the insurance, and the money paid for premiums could have been saved or used elsewhere – which is true of most types of insurance.

Then again, quotes a man who only spent $50 plus the cost of fluids when his Ford Explorer’s transmission blew up, which is normally a $5,600 repair. For the most part, what you’re paying for is peace of mind.

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