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Q

Why should I buy mechanical breakdown insurance for a brand new car which is already covered under factory warranty. What Are the advantages of MBI?


A

If you have a new car that has a factory warranty on it you may or may not need Mechanical Breakdown Insurance (MBI) on the vehicle. It will depend upon if there are gaps in your factory warranty that you feel could be filled by MBI.

There are auto insurers such as Geico that offer Mechanical Breakdown Insurance which is designed to protect you from expensive repair bills. A deductible is typically involved but after that is paid MBI normally covers repairs to all mechanical parts of the car - except for maintenance and wear and tear.

Geico's Mechanical Breakdown Insurance is excess coverage to your manufacturer's warranty. It thus would not be used unless your original factory warranty does not cover you. Geico's Mechanical Breakdown insurance is available only on new cars that are less than 15 months old with less than 15,000 miles.

Farmers Insurance is another company that offers MBI. Farmers pays for parts and labor to repair or replace major component parts. Their policy also covers wear and tear failures of covered parts. A Farmers MBI policy may be assigned to the next owner of your vehicle which could help you get a higher resale amount for your car.

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Additional parts of their MBI policy include rental reimbursement. If you need a rental vehicle due to covered repair work, Farmers may reimburse you up to $25 per day for a maximum of six days (or to the terms of your policy if it differs). Farmers will also take care of you and your family if your vehicle breaks down more than 100 miles from home. They offer reimbursement for food and lodging up to $100 per day for three days per repair visit.

So Farmers Mechanical Breakdown Insurance covers parts that stop working due to mechanical failure and wear and tear. Wear and tear may not be covered under a factory warranty that comes with a car. This MBI policy also comes with rental car reimbursement and trip interruption coverage (due to the car needing repairs) as we mentioned above. Your deductible will vary and you are required to pay it on a per occurrence basis.

MBI policies differ from company to company so you can shop around to see if there is one that would cover any holes you have in your current auto insurance policy and factory warranty for a new car. You may find a Mechanical Breakdown Insurance policy will cover you better than an extended auto warranty.

There are many benefits to purchasing Mechanical Breakdown Insurance for your vehicle such as it protects you from having to pay out of pocket for unanticipated and expensive repair bills for your vehicle. MBI coverage may include all parts and systems, not just the specific list of items covered by most dealers or add on warranties.

A MBI, such as GEICO's, can be structured to be better than an extended warranty. It provides better protection and is less expensive than the typical dealer extended warranty.

In the long run, a MBI policy may save you money over something like an extended warranty (since a factory warranty runs out after a certain time period or certain mileage) because you pay only a small premium each policy period instead of a large lump sum payment up front like you do with a warranty. Also if your MBI is like the one Farmers offers and you can assign it to the next owner of your vehicle this could help you get a higher amount for your car when you decide to sell it.

It will be a personal decision to make whether you need Mechanical Breakdown Insurance, an extended warranty or any other extra coverage for your new vehicle. Look at your auto insurance and factory warranty and see if there are any gaps that need to be filled with some sort of policy such as a MBI.


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