Is Car Repair Insurance Necessary?

By Ronald Kimmons. May 7th 2016

For most people in the United States, a car is an indispensable asset. It is necessary to get to and from work, school, the grocery store, and pretty much any other place, as public transportation is often insufficient. However, unlike real estate, an automobile is a significantly large purchase that results in the acquisition of an asset that depreciates in value rather than appreciating.

Even when you treat your car well, it will always require routine maintenance, and parts will invariably wear out over time. When this happens, the associated cost can become a considerable issue. To minimize the financial impact of such problems, some people choose to invest in car repair insurance, which helps to pay for such maintenance and repair in a manner similar to how health insurance helps to pay for clinic visits and operations. Some vehicle owners feel that car repair insurance is absolutely necessary, while others disagree.

Insurance VS Warranty

People often confuse car repair insurance with [|]vehicle warranties[:|]. Whenever you buy a car in most parts of the United States, either the seller or the manufacturer is required to provide a warranty statement. This guarantees that the party issuing the warranty will pay to fix certain problems that could appear in the vehicle’s operation, within certain constraints such as time or mileage. However, warranties invariably run out, while car repair insurance remains available on most vehicles as long as one is willing to pay the associated premiums. It is often best to rely on the vehicle’s basic warranty initially and then consider purchasing a car repair insurance policy after the warranty runs out.

Benefits To Financial Planning

The principal benefit of purchasing car repair insurance is that it allows a vehicle owner to accurately project expenses over an extended period of time. While the specific repairs that one’s vehicle may need in the future cannot be predicted, [|]insurance premiums[:|] can be predicted. This is particularly beneficial for people trying to live within very stringent budgets or for companies with fleets of vehicles. Even if the overall costs may end up being more, car repair insurance can deliver a peace of mind in that it protects against sudden expenses that are too large for the budget to absorb.

Cost Regulation

Mechanics often have a bad reputation for overcharging their customers. While it would be unfair to categorize all mechanics in this way, such problems do sometimes occur. However, when an insurance company is involved, mechanics have to keep their fees within reasonable constraints. Some people may not feel that they need such cost regulation, but for those who lack automobile-related knowledge or who do not have the disposition to deal with a questionable mechanic, it can be very valuable.

Coverage Limitations And Deductibles

As with any other insurance policy, car repair insurance policies place limitations on coverage. If your car needs any type of repair outside of what is covered in the policy, the insurance company will not pay for it. Naturally, as insurance companies are for-profit institutions, they try to get out of paying on claims as often as possible. Even when a particular item is covered, it often comes with a deductible, which is a minimum amount of money that the vehicle owner must pay toward the repair in question before the insurance company will pay anything. For instance, if your policy comes with a $300 deductible for transmission repairs and your mechanic bill is for $700, you must pay $300 out of your own pocket, and your insurance company will pay for the remaining $400.

Making Claims

A disadvantage of relying on car repair insurance is that it may take time for the company to process and pay your claim. Even if the company does pay in full, in the meantime, you may have to pay out of your own pocket anyway and wait for the insurance company to reimburse you.

Collision Coverage

In many cases, the coverage you receive from a car repair insurance policy may be redundant. For instance, most vehicle owners in the United States have some sort of [|]collision coverage[:|]. While car repair insurance covers the normal wear and tear of day-to-day vehicle use, collision insurance covers the damages that result from automobile collisions, whether internal or external.

Premium Escalation

As vehicles age and accumulate mileage, the chances of them developing problems requiring expensive repair escalate. Insurers realize this – and raise their premiums as a result. For this reason, even though car repair insurance allows vehicle owners to accurately project expenses, those expenses gradually rise over time. Eventually, it may be more affordable for a vehicle owner to purchase a new vehicle than to maintain a car repair insurance policy over an old vehicle.


Car repair insurance is only necessary for cases in which mechanic fees could be financially catastrophic. However, if you have a cushion of savings, this may make such insurance unnecessary. Instead of paying car repair insurance premiums every month, it may be better to simply keep cash in reserve to cover any repairs that become necessary in the future. While the one-time expenses may be higher, the long-term expenses in this scenario are often lower.


More in category

Related Content