Mechanical Breakdown Insurance Guide

With the average annual cost of maintaining a new car standing at $800 per month, it's no surprise that consumers are looking for insurance that covers auto maintenance and repairs.

Enter mechanical breakdown insurance, also known as general auto repair insurance.

No, MBI is not synonymous with an extended vehicle warranty. For starters, mechanical breakdown insurance is regulated by the state, whereas extended warranties are a private contract between car owners and vehicle manufacturers that is not directly supervised by the state government.

Another significant distinction is that mechanical breakdown insurance is valid at any state-licensed auto repair facility. Extended warranties, on the other hand, limit vehicle repairs to manufacturer-approved garages and repair shops.

What is Mechanical Breakdown Insurance (MBI)?

What is mechanical breakdown insurance, since it is not the same as an extended warranty? Experts in auto insurance provide some advice on the subject.

"Mechanical breakdown coverage, or MBI, is an insurance coverage that covers mechanical failures," explained Aliza Vigderman, director of content at AutoInsurance.com. "It is available for new cars that are less than 15 months old, leased cars, and cars that have less than 15,000 miles on them." MBI can be renewed for a period of up to seven years or 10,000 miles, whichever comes first."

What companies provide mechanical breakdown insurance, and how much does it cost? MBI policies are available from more reputable insurance companies than one might think.

"21st Century, AAA, Allstate, American Family (AmFam), Carshield, Endurance, GEICO, Mercury, Olive, Progressive, Toco, and USAA are among the companies that provide mechanical breakdown insurance," Vigderman said. "MBI can range from $30 to $200 per year, with an average of around $100."

Many drivers purchase MBI coverage while their vehicle is still new, which can save them money in the long run, according to insurance industry experts.

"By purchasing MBI insurance early, you'll still be within the miles covered by your manufacturer's warranty if you drive your car for your daily commute," said André Disselkamp, CEO of Finsurancy, a business-to-business insurance industry services provider. "In addition, if you have mechanical breakdown insurance, you won't have to pay for unexpected repair bills out of pocket."

A Value-Driven Proposition

Mechanical breakdown insurance is especially important for drivers who want to save money on unanticipated repairs that aren't covered by the manufacturer's warranty. "Remember that mechanical breakdown insurance typically does not cover basic maintenance or damage caused by normal wear and tear," Disselkamp cautioned.

Mechanical breakdown insurance only covers major malfunctions; this is what shapes MBI policies, costs, and longevity.

"Owners should consider how long they intend to use their car and the likelihood of having a major car issue," said Baruch Silvermann, CEO of The Smart Investor, a financial online academy for millennials.

Because newer cars have fewer breakdown issues than older vehicles, MBI is usually a good idea if you plan to keep your vehicle for five years or more. "However, some insurers do have mileage limits, so if you drive more than the average per year, you should consider carefully whether you will still qualify," Silverman said.

Auto owners considering mechanical breakdown insurance should also consider a vehicle's dependability.

"Some car brands have a reputation for greater reliability, which lowers the chances of experiencing a major breakdown issue," Silberman explained. "Finally, remember that minor repairs are not covered." Most plans have a deductible of up to $400, so if your repairs don't far exceed this amount, MBI isn't worth it."

Tips on Getting Mechanical Breakdown Insurance

Depending on your level of knowledge and experience with mechanical breakdown insurance, it's always a good idea to do your research and tread carefully before signing on the dotted line with an insurance company.

Take these tips with you to the MBI table as you conduct your due diligence.

Know what you’re insuring – and what you’re up against.

Mechanical breakdown insurance is required for eligible drivers because collision and comprehensive coverage do not cover mechanical breakdowns, only damage from specific incidents such as at-fault car accidents, theft, vandalism, and weather, among others.

"In contrast, MBI covers all mechanical parts of a car, including the transmission, suspension, heating, engine, cooling system, and other components," Vigderman explained. "If the mechanical parts fail, the owner will have to pay for repairs out of pocket, which can be costly."

Here's a breakdown of repair costs based on AAA data.

Repair - Price or range
Brake repairs – $500
Alternator or starter replacement – $400-$600
Timing belt replacement costs between $400 and $900.
Common mechanical repairs – $500-$600

"The repairs will most likely cost less than $500," Vigderman said. "With the premium cost, it may be less expensive to pay out of pocket."

Shop around – but start with your current auto insurer.

It's a good idea to shop around, just like you would for regular car insurance.

"As more insurers offer this type of coverage, do some comparison shopping before agreeing to any coverage," Silverman advised. "It's always worth checking to see if your current insurer provides MBI because you may be eligible for multi-policy or bundling discounts that could lower your overall policy cost."

Make a deal. When looking for a solid MBI policy, it's beneficial to be creative. "Bundle your auto insurance with other insurance policies you have, such as homeowner's insurance," Vigderman advised. "Also, inquire about discounts from your current insurance agent." You might be able to work something out."

Read the Small Print. While comparing MBI quotes is a good idea, make sure you also compare deductibles and policy limits," said Melanie Musson, an auto insurance expert with Autoinsurance.org. "For example, some policies may have a maximum powertrain limit while others do not."

The Takeaway on MBI

Whether you're looking for a strong, standalone mechanical breakdown insurance policy for the long haul, or a combination of MBI, comprehensive auto insurance, and an extended auto coverage warranty, it's best to start the process early, get educated, and be ready to take advantage of a good deal when it comes along.

"As more insurers offer this type of coverage, do some comparison shopping before agreeing to any coverage," Silverman advised. "You'll have good MBI coverage when you need it that way."