Mechanical Breakdown Insurance for Cars: Everything You Need to Know

What is mechanical breakdown insurance (MBI)?

You buy insurance for your car to mitigate risk. It protects you from a large financial loss.

Some drivers choose liability-only policies. It’s an option if you own the car free-and-clear, without a loan obligation.

It’s a risky position to take.

Unless you have a large bank account and the cost of replacing your car is no big deal, you’re better off with comprehensive coverage.

Besides liability, a comprehensive policy covers theft and damage from an accident.

But you can also hedge your risk from the expense of mechanical breakdown.

Even with a well-maintained car, a mechanical breakdown is inevitable. The engine alone has a lot of moving parts.


And there’s the transmission, drive shaft, steering and suspension parts.
Even new cars are subject to common types of breakdown.


Nobody plans for mechanical failure. When it happens, it can be expensive.
Here are some examples of repair costs for a 2017 Toyota Camry in Dallas, TX:


Source: Consumer Reports
And sometimes you have towing expenses.
Towing companies charge a base rate, often called a “hookup fee,” of $35 to $100. Some towing companies include the first 5 to 7 miles of towing in the hookup fee.
You’ll pay $2.50 to $5 per mile. Some companies charge more for nights, weekends, and holidays.
Source: CostHelper
And you’ll need something to drive while your car’s in the shop.
The cost of a rental car depends on a few factors.


You can look up rental car rates near you on travel websites like Travelocity.

Mechanical breakdown insurance (MBI) and a service contract both serve as an extended warranty. MBI usually covers the engine, transmission, and electrical system.

Some insurance carriers offer a plan that’s a lot like a factory warranty. It covers nearly all mechanical and electrical components.

They don’t typically cover routine maintenance such as oil changes and tire rotation. Non-mechanical items such as trim or molding usually aren’t covered.

Damage from normal wear and tear usually isn’t covered either. If the car owner neglects routine maintenance, the insurance company will likely deny any claims.

Like other kinds of insurance, it won’t pay for problems the car had before buying a policy.

A service contract is an agreement where another party pays for certain repairs. The contracts typically last for 3 years, 5 years, or 7 years.

Rather than monthly premiums, you pay the full price of the contract. Some providers will let you split up the cost into monthly payments over the first year.

Service contracts usually have lower deductibles than MBI. Most come with a deductible of less than $100.

Some service contracts might include routine maintenance such as:


You can drop MBI at any time, but when you buy a service contract, you’re in for the full term. A lot of service contracts and MBI policies are transferable if you sell your car.

You’ll pay $30 to $100 per year for Mechanical breakdown insurance. They often come with a deductible of $250 to $500.

I other words, if you need repairs that cost $1200, you pay $250 to $500. The insurance company pays the rest.

Many MBI policies let you choose any licensed mechanic. Others may have a network of preferred providers.

To be sure that you get high-quality work, look for an ASE Certified mechanic.

The National Institute for Automotive Service Excellence (ASE) is a non-profit organization. They test and certify the skills of professional mechanics and technicians.

ASE tests auto technicians in 8 areas:


ASE Certification expires after 5 years. After that, the mechanic has to take the tests again. That means mechanics have to keep up with changes in technology to keep ASE certification throughout their careers.

They don’t certify shops, but individuals. A shop can display an ASE sign even if it has only one ASE Certified mechanic.

However, they recognize businesses’ commitment to the ASE program. A shop with at least 75% of its employees ASE Certified can display the ASE “Blue Seal of Excellence.”

Dealerships. The service department at a dealer specializes in the makes of cars they sell. Mechanics are factory-certified. They are familiar with common problems and they have access to the latest service bulletins from the auto maker.

Auto Repair Chains. Some examples are Firestone, Pep Boys, and the Walmart Auto Department. They employ lower-level mechanics than dealerships and advertise low prices.

Independent shops. They are typically less expensive than dealerships. You are likely to deal directly with the mechanic making repairs rather than a service advisor.

Besides the ASE Blue Seal of Excellence, you can look for other signs of quality.

Some policies come with some additional coverage.

Before you get mechanical breakdown insurance, look into the company’s reputation. The Better Business Bureau gets a lot of complaints from consumers about extended warranties.

Here are a few highly-regarded companies that offer MBI.

Mercury Insurance offers plans for cars 7 years old or less with fewer than 100,000 miles.

Geico MBI is only available for cars less than 15 months old with fewer than 15,000 miles.

Progressive offers protection through Warranty Direct. They have plans that include rental car reimbursement, roadside assistance, and trip interruption protection.

AAA covers cars of any age or mileage. If you use a AAA owned shop for repairs, you’ll pay no deductible. At other approved shops, you’ll pay a $50 deductible.

Many car owners get a lot of robocalls where the recorded voice says, “The warranty on your [Ford Fusion, Toyota Camry, Honda CRV, etc.] is about to expire…”

Most of them are legit companies. They often engage in questionable selling practices. Many of them have several complaints with the Better Business Bureau (BBB).

Some are scammers trying to get your credit or debit card info.

Chances are you won’t get the best mechanical breakdown insurance policy or service contract from a telemarketer. If you do choose to do business with them, be on your guard.

Most mechanical breakdown insurance is transferrable. Since people rarely expect any warranty when buying a used car from a private seller, it can make your offer stand out from the rest.

When you advertise, be sure to emphasize that your car has a transferable MBI.

When you’re buying a used car, consider looking for a listing with a transferable MBI policy.


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