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What is Mechanical Breakdown Insurance?

By on March 3, 2014 in Auto Insurance, Insurance

What is Mechanical Breakdown Insurance?Mechanical breakdowns often result in costly trips to the mechanic or dealership service department. Wouldn’t it be great if you could insure against future mechanical breakdowns and have someone else pay for the repairs?

The insurance industry has created a type of insurance just for this problem called mechanical breakdown insurance.

What is Mechanical Breakdown Insurance?

This type of car insurance is usually an add-on to your normal automobile insurance coverage policy. It provides coverage against mechanical problems on your vehicle on an annual basis.

How Does Mechanical Breakdown Insurance Work?

You can’t buy mechanical breakdown insurance at any time; the insurance company wants to make sure you don’t try to buy coverage right before a repair you know is going to be needed.

Instead, you can usually only purchase mechanical breakdown insurance when the vehicle is still relatively new. How old the vehicle can be depends on the insurance company, but you can find policies with 15 month and 18 month old requirements fairly easily.

Once you purchase the policy it comes with a deductible just like any other insurance policy. This is to prevent you from filing every single repair back to the insurance company.

Once you have purchased the policy you can renew it for a set number of years up to a certain mileage amount. Typical policies range around 7 years of renewal or 100,000 miles.

Unlike an extended warranty where you pay up front and never again, you can choose to cancel your mechanical breakdown policy at any time. (The only problem is you won’t be able to renew since the vehicle is only eligible to initiate coverage when it is close to brand new.) This helps stretch the cost of the coverage over several years rather than a lump sum at the front end of the policy.

Should I Buy Mechanical Breakdown Insurance?

The viability for your use of mechanical breakdown insurance depends on how well you maintain your vehicles, how long you plan to keep the vehicle, and the cost of the coverage.

If you perform maintenance regularly on your vehicles you shouldn’t run into any significant breakdowns. This can reduce the usefulness of mechanical breakdown insurance.

Likewise, if you are purchasing a new vehicle every 5 years the use of the insurance is further reduced. A majority of vehicles will not run into significant problems during the first 60 months of ownership. Plus, most vehicles come with a warranty for the first three years or 36,000 miles. You would have double coverage for breakdowns during that time period.

Alternatives to Mechanical Breakdown Insurance

If you decide to avoid mechanical breakdown insurance your best bet may be to simply set aside the money into a savings account each year to save up for the unexpected breakdown. This prevents you for paying for the insurance and never using it; you would still have the cash with this method.

The risk with going without mechanical breakdown insurance is a costly breakdown very soon after your warranty on the vehicle expires. You can limit this risk by maintaining your vehicle according to the manufacturer’s guidelines. The number one driver of mechanical breakdowns is skipping regular maintenance. If you are maintaining your vehicle normally, you greatly reduce the risk of breakdown in the first place which can diminish the value of mechanical breakdown insurance.

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