A standard auto insurance policy doesn’t typically cover major mechanical issues, such as transmission or engine problems.

That’s where mechanical breakdown insurance (MBI) comes in. It’s an add-on type of coverage that can help cover the cost of repairs unrelated to normal wear and tear or a car accident.

Understanding mechanical breakdown insurance

Also known as car repair insurance, MBI covers mechanical failure of some of your vehicle's more expensive components. It is usually limited to new and lightly used vehicles. This type of insurance is similar to a dealer’s extended warranty but is typically much less expensive.

Standard car insurance policies generally include several types of coverage that protect you in an accident: collision, liability, and medical payments, as well as comprehensive coverage, which applies in events that are out of your control (weather, theft, etc.).

MBI goes beyond that. Depending on your policy provider, this could include problems and malfunctions with the following components:

• Transmission

• Suspension

• Engine

• Drivetrain

• Air Conditioning

• Heating

Be aware that MBI does not cover routine maintenance such as oil changes, tune-ups, or coolant flushes. In fact, your policy will likely require that you maintain your vehicle as specified in your car owner’s manual. Otherwise, your claims could be denied. Check your policy details to be sure what is covered under your MBI plan.

Check your policy details to be sure what is covered under your MBI plan.

So, overall, what are the advantages of having an MBI policy?

• Cost. Extended warranties are typically paid up-front to the dealership. With an MBI, you can pay monthly and save a decent amount of money over what you would pay during the warranty term.

• No interest. Dealerships typically roll extended warranties into the car payments, which come with interest. MBIs allow you that type of coverage without the interest that comes with it.

• Peace of mind. An MBI plan is just another way to check your anxiety about any potential budget busters because of your vehicle. If you purchase one and have full coverage car insurance, you’re insured for nearly anything that could go wrong — whether it’s an accident, an act of God, or just a large component that unexpectedly stops working.

Extended warranties vs. mechanical breakdown insurance

New vehicles come with a manufacturer’s warranty or factory warranty. Once it expires, that’s when an extended warranty would kick in.

Extended warranties cover components of the vehicle not covered by a typical auto insurance policy, like electrical systems and other large parts like a powertrain or engine. It lasts for a specific period of time and mileage, such as a 7-year, 100,000-mile warranty. Every warranty is a little different, but some also cover issues related to normal wear and tear — which isn’t part of MBI coverage.

Mechanical breakdown insurance policies are usually only available for newer cars (15,000 mileage or less). So if you’re buying a used car with a little more mileage, a warranty is the way to go, as they can usually be purchased on cars 5 to 7 years old with up to 100,000 miles.

That said, an MBI policy might make sense if you purchase that newer car. Not only can it save you money in the long run, but it also provides you with a little more freedom in choosing your repair facility. Extended warranties work similarly to health insurance, as you are covered as long as you stay within a set network of providers.

Deciding if you need vehicle protection

So when should you think about purchasing MBI protection or an extended warranty? Here are some key factors to consider:

• Age and mileage of your vehicle. As mentioned, extended warranties offered by manufacturers typically max out at 100,000 miles, or when your car is 5 to 7 years old, though some companies will offer warranties up to 150,000 miles. Mechanical Breakdown Coverage is designed for newer cars, usually with 15,000 miles or less.

• Your financial situation and risk tolerance. If you regularly keep your car on its scheduled maintenance, and you have a nice emergency fund in savings, then you might be OK taking more risk and choosing to cover repairs out of pocket. But if the thought of blown transmission and trashed brake pads haunts you, an MBI or warranty might be the right choice.

• Expected repair costs. Replacing a large Mercedes component will obviously be pricier than replacing a similar part of a Ford sedan, and the coverage costs will be different, too. Do the math on how much you’ll spend on an MBI plan or warranty, then compare it to the cost of those repairs.

Is mechanical breakdown insurance worth it?

To consider whether an MBI policy is worth it for you, let’s take a look at a specific example:

Car repair insurance can range between $100 to $500 per year, depending on the provider, with deductibles costing $250 to $500.

Let’s say you have a 2022 Honda Accord. The average annual cost in 2023 for repairs for that specific car was $1,667, according to Kelley Blue Book. If you’re paying on the high end for the cost of an MBI plan annually, plus the high range of the deductible, the coverage itself would save you nearly $700 per year in that specific case.

Of course, every vehicle comes with a wide range of different expenses, and each policy will offer a different range of coverages.

Tips for evaluating MBI providers and policies

• Compare costs. Numerous car insurance companies, including Geico, Allstate, and Progressive, offer MBI coverage. Compare quotes and policies and choose what works best for you and your vehicle.

• Compare coverages. Each policy has different exclusions. Keep in mind that MBI doesn’t cover issues of neglect, so if you’re not getting scheduled maintenance for your car and a maintenance issue comes up, your insurer can reject your insurance claim.

• Think about different situations. When comparing policies, put yourself in different scenarios. If your car is in the repair shop for a week, does the MBI policy cover a rental car? What about towing and roadside assistance? Some do but some don’t. Know what you’re paying for.

Ask questions. Like any insurance, MBI coverage can be complicated and intricate. Ask any questions you have for your provider on the front end for added peace of mind.