You may have heard of car insurance, also known as mechanical breakdown insurance, or an extended car warranty if you’re searching for ultimate protection for your vehicle, but are they the same thing?
Although both protection packages cover various expenses, car insurance is essential when purchasing a new or used car. Depending on what you’re looking for, you may not need both. However, it would be best if you first understood the difference between a USA auto warranty and car insurance coverage before making your decision.
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Car Insurance: What is it and How Does it Work?
Car insurance is required by law in all 50 states. In the event of an accident, this is to cover drivers, passengers, other motorists, and pedestrians. Car insurance companies offer vehicle body insurance coverage, medical payments after an accident, additional vehicle rental costs during repairs, and much more.
Car insurance protects you from sudden accidents caused by someone else and covers damages to your car. Auto insurance is compulsory in every state, so you will have to get a policy before you start driving.
Examples of Car Insurance Coverage
An insurance company usually offers the following:
- Collision coverage: This type of coverage will repair or replace your car if it’s damaged from a collision with another vehicle or object.
- Liability coverage: If you are the cause of an accident, liability coverage will pay for another person’s medical bills if they were injured in an accident caused by you. This coverage also applies to property damage caused by you to a vehicle or home in the accident.
- Uninsured motorist coverage: The cost of an accident or medical payment is covered under this section of an insurance policy if someone without insurance is the cause of an accident that you’re involved in.
- Medical payments coverage: Medical coverage, often known as personal injury protection (PIP), is required in some states and covers medical expenses and services. It may also cover funeral costs in some situations.
- Comprehensive coverage: Your vehicle is covered by this part of your insurance and covers damages that aren’t caused by an accident, such as a break-in, earthquake, or fire.
- Gap coverage: Gap insurance, which is typically reserved for newer cars, helps pay the difference between the remaining balance on a lease or loan and what the company will pay in the event of a total loss.
A standard insurance policy doesn’t cover wear and tear and individuals driving for a ridesharing platform. You’ll need an extended warranty on a used or new vehicle to cover repairs that would ordinarily cost more.
Extended Warranty: What is it and How Does it Work?
Also known as a vehicle service contract, a car warranty is an agreement between you and a company, typically your car’s dealer or manufacturer, that covers repairs for a set amount of time or mileage.
When your current warranty expires, most choose an extended warranty to cover repairs and replacements that the original manufacturer’s warranty doesn’t cover. Extended car warranties generally do not include theft, natural disaster damage, or vandalism.
Examples of USA Auto Warranty Coverage
Comparison of plans is made easier by understanding different types of coverage. Examples of different extended warranty coverages include:
- Powertrain: Covers a car’s engine, drivetrain, and transmission components.
- Drivetrain: Covers the driveshafts, axles, and transmission.
- Corrosion: The cost of fixing damages from rust and other environmental factors is covered.
- Bumper-to-bumper: Bumper-to-bumper warranties are also referred to as an exclusionary package for all major car systems. The contract includes a list of components or systems not covered.
- Wrap policy: Protects what a powertrain warranty does not cover. It extends the bumper-to-bumper cover, including repairs for everything on the vehicle, and excludes wear and tear to align with the powertrain warranty length.
Which is the Best Coverage for You?
To understand what your plan or policy covers, refer to the terms as indicated in your contract. These terms describe:
- Deductibles – what you pay per claim
- Premiums – the payment of the policies
- Limitations on coverage – each covered item’s maximum payout
Extended warranties offer lower deductibles, more flexibility, and additional coverage options. You can buy an extended auto warranty online upfront or financed, usually within one to three years. However, if you need something cheap, car insurance can be a great solution if you choose it as it provides car repair coverage at an affordable cost. Payments are made monthly, every six months, or annually.
Over time, most cars break down, whether you’re in an accident or not. If you’re concerned about the financial stress of paying for costly auto repairs, an extended car warranty is worth it.