Every driver on the road is required by law to at least be insured for liability, that means that if you accidentally hit someone else’s vehicle the insurance company will pay out in order to help them repair their vehicle. Many drivers opt to purchase insurance policies that go further and for an additional cost, provide you with ‘collision protection’. This means that not only are you covered for the damages to the other person’s vehicle, but you are covered for auto repair to your own vehicle as well. Now, there are other types of coverage that you may have heard of. Bodily injury liability coverage provides additional insurance for bodily harm caused to another person that you get in an accident with, comprehensive coverage covers damage due to just about anything else besides an auto accident (lightning, tornadoes etc.)
But, a type of insurance you may not have heard of is car repair insurance. Car repair insurance, as you may have guessed, covers repairs that you need for your vehicle. Yes, it is possible to insure your car against breakdowns and even normal wear and tear, so that the next time you have to head to the auto shop the insurance company will be paying instead of you.
So, is car repair insurance right for you? Well, that depends on a number of factors. Of course, like any other form of insurance, insuring your car against auto repairs is essentially making a bet. You are betting the cost of your monthly premiums (plus any deductible that you have to cover before the insurance kicks in which depends on the policy) that your car will breakdown and require a costly auto repair at the auto shop. So, if your car repairs are around the average per year, you will spend somewhere around $1,000/year on repairs. So, if you could get no-deductible auto repair insurance (no-deductible as an example for the sake of mathematic simplicity) for less than $80/month or so, it could be worth it. Again, you’re gambling, so you may go two years where you only needed $600 in repairs and then in the third year, your catalytic converter breaks and you need a $3,500 repair. For the first two years, the insurance would not be cost-effective, but in third year it will have paid off by a significant amount.
Another factor to consider is whether you car is under warranty. If you have a comprehensive warranty that pays for repairs, it makes no sense to also have car repair insurance because the coverage would be redundant, your warranty will already pay for repairs. But, when your warranty runs out after a few years (when your car is more likely to require a costly repair) the insurance could be worth it.
As always, it is a decision that you will have to make by doing your own research on your specific situation. If you are planning on contacting your insurance company to ask about insurance, keep in mind that although they may give you some good advice, they are also going to have a financial incentive to sell you any insurance they have so they can’t be counted on to be unbiased.
(photo by trenttsd via Flickr)