Mechanical breakdown insurance (MBI) is an optional part of car insurance meant to cover trips to the mechanic not caused by an accident. Engine busted, puncture in the A.C. hose - MBI will cover it. While the coverage seems reasonable in principle, many experts question its value. Car breakdowns can be expensive, but the frequency for which they happen is low. In this article we break down the benefits and detriments of MBI, and how it is different from an extended warranty.
What is Mechanical Breakdown Insurance?
Mechanical breakdown insurance covers major failures that can occur in your car, which is often excluded in basic auto insurance. Whether its bad brakes, transmission issues or electrical system or any other major vehicle system malfunctions, MBI covers the repairs to get it fixed. File an online claim like you would with any car-related issue, and the company will reimburse you for the cost of repairs. What MBI does not cover is routine tune-ups or tire issues. It will also not cover damages caused by poor maintenance on the driver's part. Any repairs caused by a car accident or crash goes through your collision or comprehensive coverage.
Unlike better-known types of car insurance, not every company offers MBI, nor does every driver qualify. The largest company to offer MBI is GEICO, who allows customers to opt for the coverage in online quote forms. Smaller companies that offer it include Mercury Insurance. Progressive and 21st Century also market MBI plans, but both are underwritten by other companies - and are more akin to extended warranties which are discussed below.
To qualify for MBI at GEICO, your car needs to be less than 15 months old, and have less than 15,000 miles on the odometer. Mercury’s plan is a bit broader, and will accept a wider range of cars, so long as they are under warranty. Admittedly, there is a lot of overlap between MBI and your car’s warranty in terms of coverage. Many of the things that can break down with a new car will be covered by the warranty. On the other hand, MBI plans are a bit broader than a regular warranty, and may cover breakdowns that don't match the specific descriptions laid out in a warranty. MBI plans also last longer than warranties, which are usually for three years. Unfortunately, you have to buy MBI coverage while the warranty is still in force, in anticipation of its eventual termination. GEICO’s and Mercury's MBI plans are good for periods of six to seven years, or 100,000 miles, whatever comes first.
How Much Does Mechanical Breakdown Insurance Cost?
Compared to the cost of insuring a car, MBI is usually not too expensive. We found quotes from New York where it only cost $30 per year for a 2016 Ford Edge with a $250 deductible. A Wall Street Journal investigation found policies could be $75 a year with deductibles up to $400. Below we list the price for cars ranging in value from about $24,000 to $64,000 which were given the same pricing for MBI. Cars with greater values, like a Tesla Model S ($70,000 and up) and the Audi R8 ($160,000), may not be covered by MBI plans. When we contacted GEICO, they informed us that cars of too high a value may not qualify for MBI.
Mechanical Breakdown Insurance vs. Extended Warranty
Essentially, MBI and extended warranties are the same thing, but operate in few different ways. The main advantage to MBI is that they are usually less expensive than extended warranties. A Consumers Reports study found that that the average initial cost for an extended warranty was $1,214 for a three year plan. Compared to the prices we found for MBI, costs would come out to about $180 to $450 for the six years the policy is in effect. Extended warranty plans also require you to pay the amount up-front, as opposed to installments. MBI plans also tend to have more flexibility in where you can bring your car for repairs. Extended warranties may require you to only use certain mechanics and garages. Lastly, extended warranties tend to have a smaller deductible than MBI. In the New York quote above, we were unable to adjust the $250 deductible. An extended warranty will have a deductible usually under $100. Lastly, as we stated above, high value cars may not qualify for MBI, while they may qualify for an extended warranty.
Is Mechanical Breakdown Insurance Worth the Price?
For MBI to be worth it, you would need to have a breakdown that exceeds the combined price of the plan and the deductible. Assuming a $75 per year plan for six years and a $250 deductible, you would need a breakdown of greater than $700 in those six years for it to be worth it. If you do experience a system failure in your vehicle, it will most likely exceed $700. A blown transmission costs on average between $1,800 to $3,500 to replace, while a broken head gasket could cost $1,200 to $1,600 to fix. So, if one of those were to happen, you would save anywhere from $500 to $2,800 dollars when you take the cost of the repair minus the cost of the insurance. If it does happen, you'd save a lot of money with the MBI insurance - it comes down to how likely your car has a non-accident breakdown, and the value of the peace of mind.
How can you measure your chances of having a major car malfunction? The first thing to consider is how long you are going to use your car for. Newer cars tend to break down less than older ones, so you should really only get MBI if you plan to keep your vehicle for more than five years. Remember as well though, GEICO will only insure the vehicle up to 100,000 miles. If you anticipate hitting that number just as your initial warranty ends, then there is no point for the coverage.
The next thing to consider is the reliability of your car. Some cars are built stronger than others. In the Consumer Reports study about extended warranties, they found BMW and Mercedes-Benz owners were more satisfied with their plan. Those cars break down more, and thus customers were able to use the warranty. If the type of car you drive has a record of going many years without breakdown, there probably will be a less likely chance of having to use MBI. Luckily, you don't have to guess the reliability of your car, as you can look up it up at Consumer Reports or at TrueDelta.
Lastly, you should remember that MBI will not cover minor, thus more likely repairs. These plans come with $200 to $400 deductibles so unless the damages far exceed those amounts, the coverage won’t be worth it.