Do you need mechanical breakdown insurance?

By Michele Lerner on October 4th, 2011

Mechanical breakdown insurance coverage pays for car repairs beyond a manufacturer's extended warranty. It is available from your car dealer, some insurance companies, and some banks and credit unions. You can finance the coverage when you purchase your car or pay the full cost outright.

When you are buying a new car, think about how long you intend to keep the car and how many miles you typically drive. Compare a mechanical breakdown insurance policy with your extended warranty to see if you need the extra coverage.

If you are buying a used car, you may not have any manufacturer's warranty at all. So, purchasing mechanical breakdown insurance is one option to consider.

Mechanical breakdown insurance varies widely in cost, from as little as a few hundred dollars to thousands of dollars. The cost is based on several factors, including the type of car you are insuring, the number of miles on the vehicle and how long you intend to protect the car.

How mechanical breakdown insurance works

Your mechanical breakdown insurance coverage can be tailored to your needs. For instance, you can buy a minimal level of insurance to protect against the cost of a few major repairs, for instance, replacing your transmission, or purchase the maximum coverage at a higher cost. Your decision should be based on how long you anticipate keeping your car and how many miles you think you will drive it.

Some companies have a deductible you must pay, while others have no deductible.

While some mechanical breakdown insurance policies require you to use a specific mechanic or to have your repairs done by your car dealership, others allow you to use any licensed mechanic. In most cases, your mechanical breakdown insurance company will pay the mechanic directly so you do not have to wait to be reimbursed.

Many of these service contracts also offer 24-hour emergency road service, towing, assistance and battery jumping. You also may be eligible for a rental car if you need one while your car is repaired.

Mechanical breakdown insurance generally can be transferred along with your car. So, if you sell your car, you can offer the added protection of repair coverage to a buyer. Or, if you prefer, you can cancel the contract and get a refund for the unused portion of your premium.

Be sure to compare the cost of mechanical breakdown insurance from more than one company. Also, pay attention to the list of repairs covered under the policy before you decide if this protection is right for you.

Michele Lerner

Michele Lerner, author of "HOMEBUYING: Tough Times, First Time, Any Time", has been writing about personal finance and real estate for more than two decades for a variety of publications and websites including Investopedia, Insurance.com, HSH.com, SavingsAccount.com, National Real Estate Investor magazine, The Washington Times, Urban Land magazine, NAREIT's REIT magazine and numerous Realtor associations.

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