p>Ten years ago, Martin Williams' first car was a used 1996 Peugeot 406. Since this was a used foreign car, he should have considered buying auto repair insurance in addition to his standard auto insurance policy.
"The model had been launched that very year, so even though the car was secondhand, it was in great condition," he says. Within four months of the purchase, Martin found himself with a broken rear axle. "These mechanical problems can crop up any time, but it was only when the repair center asked me whether I had auto repair insurance that I learned that such a thing exists," says Martin.
Many car owners are unaware of the benefits of auto repair insurance. After your car warranty expires, this type of insurance should go hand in hand with your auto insurance to protect you from large car repair bills.
How Auto Repair Insurance Works?
Similar to auto insurance, this is a contract between a vehicle owner and the car insurance company, which binds the company to pay for all repairs done on the vehicle for a fixed length of time.
Coverage varies widely from company to company and few states in the U.S. regulate auto insurance coverage. So it's important to become familiar with insurance terms and industry requirements, while also understanding how insurance is regulated in your state.
What It Covers?
A standard auto repair insurance policy typically covers the breakdown and the wear and tear of your car, although the two are not always mutually inclusive. Some companies may only offer breakdown coverage, which means they are only liable to pay for repairs necessitated by breakable parts. If you want a wear and tear policy as well, which covers parts that wear out over time, you may need to purchase that from a separate company or shop around for a car insurance company that offers both.
There are also policies that cover the engine, transmission, and other parts of a vehicle through which oil flows. However, this would be least preferable in terms of coverage, since it does not include a majority of a vehicle's components.
Bumper-to-bumper policies are available from some car insurance companies, which cover nearly all the mechanical systems of a vehicle (from bumper to bumper). If there are any exclusions, the policy will list the parts that are not covered. For instance, policies do not cover parts like brake pads and windshield wipers. Likewise, most policies do not cover overheating resulting from a faulty radiator.
The Bottom Line
Before you buy your auto repair insurance, make sure you know exactly what is covered, as well as how much you will be paying by way of deductibles. Even if the manufacturer's warranty has lapsed, you can still receive coverage on vehicles that have done less than 100,000 miles. But keep in mind that as your vehicle clocks up the miles, the cost of a policy will increase, as will repair costs.
A perk you'll want to know about: if you buy a transferable policy, you can actually leverage it to increase your car's resale value.
While most people are very aware of the benefits of having auto insurance, few understand how auto repair insurance can protect you from unexpected repair bills. Now you have a better understanding of how it works so you can make an informed decision on whether this type of insurance is right for you.
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