The world of extended warranties and service plans can be a confusing place to wade through. Plans have different names and companies offer different products and services, so it’s easy to become frustrated with having to sort through it all. Mechanical breakdown insurance is a term you’ll likely hear along the way, but it’s not as different from an extended warranty as its name implies. Let’s dive in and take a look at what mechanical breakdown insurance is, and how it works.
Mechanical breakdown insurance, or MBI, is nearly the same thing as an extended warranty, but is typically cheaper and offers more payment flexibility than traditional extended warranties. Many MBI plans offer the ability to pay monthly and allow plan holders to choose the repair facility, where many extended warranty companies require customers to take their vehicle to a shop within their network of approved service providers.
Typically, MBI plans are required to be purchased while a vehicle’s factory warranty is still in effect. Companies like Geico offer MBI plans that extend out to six or seven years or 100,000 miles.
Extended warranties function much in the same way that a vehicle’s factory warranty does, protecting the owner from costly financial outlays as a vehicle ages. To be completely accurate, these warranties should be called vehicle service contracts or vehicle protection plans, but the basic concept is the same either way.
Functionally, MBI plans and extended warranties are almost the same. MBIs tend to be less expensive and tend to offer more flexibility in terms of payment options and monthly payments.
MBI plans tend to be less expensive on a regular basis, but may carry a higher deductible or service cost. Cars with higher values may not be eligible for coverage under an MBI, but a plan for more mainstream vehicles could cost anywhere from $30 to $100 per year, and deductibles range from around $200 to $500 or more.
Extended warranty giant Endurance says that a typical plan costs around $4,000, but notes that it offers flexible payment plans and does not require the entire sum to be paid up front. Your costs could vary wildly depending on the vehicle you drive, so it’s important to check with your warranty provider.
You should consider MBI if you own a newer vehicle without tons of miles that is still covered by its factory warranty. Keep in mind that if you own a high-value vehicle, such as a Tesla Model S or BMW X7, you may not be able to purchase an MBI.
You should consider buying an extended warranty if your vehicle is out of its factory warranty coverage period. You can typically purchase an extended warranty at almost any time, but be aware that you shouldn’t wait until there’s a problem to start your search.
Mechanical breakdown insurance can help once your factory warranty has ended, but must usually be purchased before factory coverage expires.
MBI plans and extended warranties are typically worth it, at least from a financial standpoint, for a narrow set of drivers. However, if either provides you with the peace of mind you need to drive stress-free, the purchase can be worth its weight in gold.
MBI plans are basically the same thing as extended warranties, but cost less and offer more flexibility in payment options.
Traditional auto insurance does not cover mechanical failure, though some insurance companies offer extended warranties. Auto insurance is intended to cover damage caused by collisions, accidents, and other issues.
If you’re unlucky, you may face a situation in which your repair bill exceeds the value of your car, but your auto insurance company won’t total the vehicle because of it. Insurance only covers damage and accidents, so mechanical issues are your responsibility.
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