What Is Auto Repair Insurance?

Cars break down. There's simply no way around it. One day, yours probably will, too. Because of that likelihood, the insurance industry has brought us auto repair coverage. But is it worthwhile? Maybe not. We'll dive into the details so you can decide if it's right for you.

Auto repair insurance is a special type of insurance product that covers some types of auto repairs. It's also called car repair insurance, or mechanical breakdown insurance. It's different from your regular car insurance that covers you against damages that you cause, or that might happen to your car. But unlike regular car insurance, it's not so clear-cut about what it covers or whether you should buy it.

"I always try to get clients in general to think of what is insurance really supposed to be for," says Brian Haney, an insurance consultant with The Haney Company.

Insurance is meant to cover things that have a low probability of happening, but that would be financially devastating for you, something that insurers call catastrophic risk. Examples include car crashes, earthquakes and having your car stolen

"Mechanical breakdown is the function of what happens when you drive. It's not a catastrophic risk. It's just car wear and tear," Haney says.

Still, plenty of insurance companies are happy to sell you car repair insurance as an add-on to your existing car insurance, and in some cases, as separate policies altogether.

At a basic level, auto repair insurance works similarly to other types of insurance. You can purchase auto repair insurance from many insurance companies as an add-on to your existing policy, or from independent companies and credit unions. Your exact price for car repair insurance depends on a lot of things, like how old your car is, how many miles it has and what exactly is covered, etc. It also varies widely by companies. Generally, you can expect to pay around $100 per year, but it can run up to $900 per year with some companies.

However, that's just for the premium. You'll likely also have a deductible that ranges between $100 and $500 each time you need to make a claim. The procedures for how to make a claim vary, but generally, you can choose your own mechanic. The company may handle payment for you (minus your deductible), or they may reimburse you later on—it just depends on the company.

Another important point is that auto repair insurance is generally only available on newer cars. If you have an older car, or a beater—the type of car most likely to benefit from this type of insurance—you generally won't be eligible.

American Family Insurance ForeverCar program: This covers major mechanical repairs on cars up to 225,000 miles, although you need to set up coverage before your car has 175,000 miles or 10 years on it. Coverage costs $45 to $75 per month.[1]

Progressive mechanical breakdown insurance: This covers major mechanical repairs on cars up to 100,000 miles, or 15 years old. It comes with a deductible ranging between $100 and $500.[2]

Geico mechanical breakdown insurance: This covers major mechanical repairs, but to get started your car must be less than 15 months old with fewer than 15,000 miles on it.[3]

For most people, car repair insurance offers similar coverage to extended warranties. Here are the main differences between the two:

It's also important to note that you don't necessarily even have to purchase either of these options. They generally only cover major repairs, and according to one study, only around half of people end up using extended warranties anyway.[4] If you're comfortable with it, many experts say that it's better to self-insure against all repairs and maintenance by saving up money each month for car expenses.

If you have a relatively new car and you're worried about paying for breakdowns, you'll need to make a decision: Should you pay for an extended warranty, or auto breakdown insurance? One might be better than the other depending on the details and costs of each, and to really know, you'll need to read the nitty-gritty details of each policy and consider your financial situation.

Here are the main questions to ask for each option:

• How long will this coverage last me?

• What's the exact process for getting a repair done?

• What exactly is covered? More importantly, what isn't covered?

• How much will this cost me now, and each time I need to use it?

• Can I take my car to any shop I want? Or am I limited to certain ones?

If you're like most of us and not an expert legal-lingo reader, a good insurance broker can help you sort these details out.

"Take a second and just call up your insurance broker and say, 'Hey, I'm thinking about this. Can we just talk through hypothetical coverage situations? Or what would you recommend?'" says Haney. "They'll be able to talk you through that and maybe even give you some pricing pointers."