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Mechanical Breakdown Insurance: Everything You Need to Know

Published May 27, 2021

5 minute read

Rebecca Henderson

By Rebecca Henderson

For most of us, a broken-down car is never a good thing. You rely on your vehicle to get you where you need to go, right? So why not purchase specific insurance that helps keep your vehicle running well? Mechanical breakdown insurance is the type of policy you’re looking for. This kind of insurance policy helps protect you when auto repair bills skyrocket. In this article, we’ll show you exactly what mechanical breakdown insurance is and how it works. We’ll also teach you what kind of coverages you can expect. For those of you wondering why an extended warranty wouldn’t be the better choice, we’ll answer that question too!

What is Mechanical Breakdown Insurance and How Does it Work?

Mechanical breakdown insurance (or MBI) is really just “car repair insurance.” While you typically have to buy MBI before the factory warranty runs out, it normally extends beyond the coverage offered by that warranty. However, it doesn’t cover repairs caused by accidents.

Premiums for MBI are “calculated based on the term of the coverage, the condition and quality of your car, whether it’s new or used, and the miles you’ve logged,” according to MoneyCrashers. It can sometimes be added onto your existing car insurance policy. Luckily, the process is relatively simple.

In the event you need a repair, you file a claim with your insurance company. After that, just follow their guidance. Typically that involves them finding an approved mechanic to do the repairs, diagnosing the vehicle at that mechanic, and then reimbursing you for the repairs completed. Like most other kinds of insurance, you’ll likely have to pay a deductible.

It’s important to note that MBI is “not offered by every company, nor does every car qualify.” For example, vehicles with higher value may not be eligible. Be sure to check with your local insurance agent to see if your vehicle qualifies.

What Does Mechanical Breakdown Insurance Cover

Now that you know what mechanical breakdown insurance is, let’s take a closer look at what you can expect. Generally speaking, the following things are covered by most MBI policies.

As you can see, mechanical breakdown insurance can pay for itself — especially if you have engine or transmission issues. These types of problems typically require repairs costing in the thousands of dollars. Paying a $250 or $500 deductible instead of the full cost of a new transmission is a great deal.

What Isn’t Covered by Mechanical Breakdown Insurance

Like most insurance policies, MBI doesn’t provide across-the-board coverage. For instance, here are a few exclusions to most mechanical breakdown insurance policies. Here are common vehicle repairs or maintenance costs that aren’t normally included.

To find out more about what might be excluded from your policy, check with your local insurance agent.

Who Offers Mechanical Breakdown Insurance

If you decide mechanical breakdown insurance is something you’d like to add to your vehicle’s protection, here are a few companies you should look into. There may be other options, depending where you live. As with buying any type of insurance, it pays to shop around a bit and compare prices and coverages.

Obtaining a quote for MBI will allow you to compare coverage between companies. You should also ask about specific terms, including up-front fees, labor cost coverage, claims process, and processing fees.

Extended Warranty vs. Mechanical Breakdown Insurance

You might be wondering why you would choose MBI over a traditional extended warranty. What are the differences, exactly?

For starters, extended warranties are normally paid up-front (but are also negotiable). You may be surprised to know that extended warranties “do not follow state insurance laws and can be offered by third parties as well as through the manufacturer.” With a deductible typically under $100, extended warranties often require you to only use certain mechanics or dealerships when it comes to repairs. While you can purchase an extended warranty on a new vehicle, the terms are more specific than you’d find with MBI.

On the flip side, MBI often lasts longer than an extended warranty. Besides broader coverage, it’s paid over a longer time period. It’s also more flexible when it comes to where you can get your car repaired. Since it’s ultimately a type of insurance, MBI is “regulated by state insurance laws” and “less costly in the long run, but the deductible can be higher.”

Mechanical breakdown insurance may not apply to high-end vehicles. Another thing to keep in mind is that MBI may require you to pay a different deductible for each issue. That could get expensive, in a hurry. Keep these differences in mind when you’re considering purchasing either an extended warranty or MBI.

Extended Coverage: Warranty or Insurance

Choosing to sign up for mechanical breakdown insurance comes down to what you intend to do with your vehicle over the next few years. It also depends on how much you’ve got saved in your emergency fund. ValuePenguin reminds you that “or MBI to be worth it, you would need to have a breakdown that exceeds the combined price of the plan and the deductible.” As we mentioned, engine or transmission issues could rack up the repair bill quickly. Only having to pay that deductible could save you tons of money.

At the same time, many experts argue that you don’t necessarily need MBI if your vehicle is only a few years old. This is especially true for models that are more inexpensive to fix than a luxury or high-end vehicle. The manufacturer’s warranty should typically cover most issues if they arise. However, some folks enjoy the comfort of knowing they have a bit of extra cost safety. That’s why mechanical insurance is available.

Extend Your Vehicle’s Coverage

Whether or not you do purchase mechanical breakdown insurance, we hope this article has helped you understand the alternatives to traditional extended warranties. When it comes to the automotive world, more knowledge can make a huge difference. Knowing how to keep your vehicle running properly — and where to turn if it isn’t — could mean the difference between thousands of dollars in debt and the peace of mind that a low deductible can offer.

Mechanical Breakdown Insurance

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Rebecca Henderson

Freelance Writer

Rebecca Henderson has a Master's in German and a Bachelor's in Creative Writing. She alternates her time between writing and working on a variety of motorized projects. Most recently, she and her boyfriend have been building a custom drift trike. Rebecca believes that language, love, and a life worth living are only the first ingredients to happiness.

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