What is Mechanical Breakdown Insurance?

You’ve just bought that new, or new-to-you vehicle, and now you are inundated with unwanted calls offering to extend your factory warranty. While the Federal Government says most of those calls are likely scams, it might still leave you wondering if you should get one from a legitimate company.

But there are a lot of different products out there, with a lot of often confusing names, such as service contracts, extended warranties, and another common one, mechanical breakdown insurance. We’ve got lots of guides to help you navigate choices on our extended warranty page. In this article, we’ll talk about mechanical breakdown insurance specifically.

What is Mechanical Breakdown Insurance?

Mechanical Breakdown Insurance, or MBI, is one of the more straight-forwardly named products in the extended warranty field. It’s quite literally an insurance policy that provides coverage if your vehicle suffers a mechanical breakdown of a covered part. That means if your transmission conks out, and it’s covered by an MBI policy, you won’t have to foot the whole bill yourself.

Generally, MBI policies are regulated by the state they’re sold in as regular insurance policies. That means certain protections, such as licensing requirements and mandatory pricing caps, can be found with mechanical breakdown insurance policies.

Most MBI policies require you to pay a deductible when you use them, just like other insurance policies. That deductible is often in the neighborhood of $100-$250, but that can vary. One thing to check when looking at policies is how much the deductible will be.

What is the Difference Between Mechanical Breakdown Insurance and an Extended Warranty?

MBI is different from a regular extended warranty because it’s actually an insurance policy. Extended warranties often aren’t; they’re more accurately known as vehicle service contracts. While both service contracts and mechanical breakdown insurance policies target similar things, an MBI policy is usually regulated by the state it’s sold in as insurance. That generally means a company providing MBI has to follow the same regulations as any other insurance policy. It also often means that the state can control how much a company is allowed to charge for an MBI plan. That’s a big difference from extended warranties, which usually don’t have price regulations. Extended warranties can cost as much as the company providing them wants to charge.

But there are other considerations when choosing between a service contract and MBI. Oftentimes, service contracts come with included extras that aren’t part of an MBI policy, such as roadside assistance or trip interruption coverage.

Depending on the state, extended warranties are often regulated less aggressively than mechanical breakdown insurance by the government. Some states have next to no regulations on extended warranties other than standard contract-law requirements. Others regulate extended warranties much more heavily. MBI policies are generally always regulated because they fall under a state’s insurance code.

If you’re shopping around for an extended warranty, take a look at Car Talk’s top rated choices in the industry.

What is the Cost of Mechanical Breakdown Insurance?

Pricing for MBI policies vary depending on what kind of car you drive, how old it is, its reputation for reliability, and the level of coverage you choose. Some drivers might pay as little as $30 per month, while others with less reliable cars or cars that are more expensive to fix will pay more.

Some policies, such as Geico mechanical breakdown insurance, are rolled into your regular comprehensive car insurance policy. Your monthly premium will be a little more, but you won’t pay a separate bill for the MBI coverage.

Is My Car Eligible for Mechanical Breakdown Insurance?

That depends! If your car is new, or nearly new, you’re likely eligible for a mechanical breakdown insurance policy. Older cars, or cars with lots of miles on the odometer, often aren’t candidates for MBI, but they might qualify for a vehicle service contract.

Some companies, like Geico, will only cover new cars with less than 15,000 miles. Others are a bit less strict, but in general if your car is old or has a lot of miles on it, your only option might be a vehicle service contract.

If your car is not eligible for an MBI, you can check our Car Talk’s top choices for warranty coverage here.

What’s Different About Mechanical Breakdown Insurance in California?

California has some of the strictest laws in the nation governing vehicle service contracts and mechanical breakdown insurance. Unlike other states, you can’t even buy an extended warranty except from a licensed car dealership. In fact, it’s a felony for any company that isn’t a licensed car dealership to sell vehicle service contracts in California. If you’re looking for breakdown coverage in California and you don’t get it at a dealership, it must be mechanical breakdown insurance.

Because of that, some companies, such as Omega, Mercury, and Toco, which sell extended warranties elsewhere offer MBI only in California. Other companies, such as CarChex, don’t offer breakdown coverage in California at all because of the MBI laws.

Read more in Car Talk’s State by State Guide.

What Does Mechanical Breakdown Insurance Cover?

What an MBI covers depends on the level of coverage you choose. Lower levels may only cover the powertrain. The highest level is often what’s known as an exclusionary contract, which means it covers anything that is not specifically listed as not being covered. If you can get an exclusionary contract for your mechanical breakdown insurance, that will almost always provide the highest level of coverage.

Typical parts covered by MBI policies include:

• Transmission parts other than wear items
• Engine parts other than wear items
• Air conditioning
• Oil pump
• Water pump
• Alternator
• Steering rack

What Does Mechanical Breakdown Insurance Not Cover?

Most MBI policies will not cover maintenance or wear items. Things like oil changes, air filter replacements, and other routine maintenance chores are still on you. You’ll also have to pay for things like clutch replacements, because clutches are wear items.

Most MBI policies will probably not cover parts such as:

• Clutch
• Oil change
• Air filter
• Cabin filter
• Fluid changes (coolant, brake fluid, etc)
• Brake pads and rotors
• Spark plugs
• Tires
• Wheel balancing
• Anything caused by the owner’s failure to perform routine maintenance

Is Mechanical Breakdown Insurance Worth It?

As with any question like this, the answer is “it depends.” Statistically, you will probably pay more in premiums than you will claim in covered repairs. That’s typical of any insurance policy - you probably have insurance on your house that will pay out if it burns down. It’s very likely that you’ll never actually use that coverage, but if you’re unlucky enough to need it, it’s a nice thing to have.

If you drive a car that’s got a reputation for breaking down a lot, and repairs are expensive, then an MBI policy might well be worth it. On the other hand, if you choose a new car with a rock-solid reputation for reliability, it’s much more likely that you won’t need repairs that cost more than you’ll pay in premiums. In that case, it might not be worth it to you from a purely monetary point of view. However, for some people the peace of mind from knowing you won’t be stuck with a sudden repair bill on a covered part is more valuable than a straight financial calculation.