The Difference Between a Car Warranty & Car Insurance

Warranty, insurance, same difference, no? Wrong. When it comes to cars, this is especially so. If you've been looking into getting a warranty on a car and aren't sure whether there is even a point if you have insurance, read more about this to learn the difference.

Car warranties and car insurance policies are two very different types of cover for your vehicle.

Whether you’re looking for the best extended car warranty to pair with your insurance plan for maximum protection or if you’re unsure if you need a car warranty at all, you should know the difference.

Generally, warranties will cover mechanical breakdowns and manufacturer’s defects on your vehicle, while insurance policies will cover damage to your car, other people, or property after you are involved in an accident.

Let’s take a closer look at car insurance and car warranties, and the differences between them.

What is Car Insurance?

Your car insurance is a contract between your insurance company and you. You pay an agreed-upon, set amount each month for coverage – which is financial protection should you get involved in a collision or accident.

Car insurance is mandatory, and it may also cover the costs incurred in the time between writing off your car and purchasing a new one. In the U.S. you must have an active car insurance policy, and a lapse in coverage may result in a ticket or raised insurance rates.

Car Insurance Options

Although the law prescribes minimum auto insurance according to the state and you need to have auto insurance before purchasing a vehicle, you will have different options when it comes to coverage.

Most states require a minimum of liability coverage by law, but there are a few standard options that you can choose from. These are comprehensive, collision, personal injury protection, and uninsured motorist.

What is a Car Warranty?

The biggest difference between auto insurance and a car warranty is that auto insurance protects your vehicle after an accident, and a car warranty covers the cost of repairs when it breaks down. A factory car warranty comes with every new car you purchase and provides cover for a limited period.

New Car Warranties

Car warranties are a buffer against financial loss due to a defect and are a guarantee that cars leaving the factory are manufactured at a certain standard.

While car warranties cover repairs that occur due to mechanical breakdowns, they do not cover wear and tear, such as windscreen wipers, brake pads, and tires.

Car warranties come in three main packages: powertrain, inclusionary, and exclusionary. The powertrain option offers the most basic coverage and only covers necessities, like the engine.

The inclusionary warranty is a bit more comprehensive and will cover a list of components.

Aside from the manufacturer’s warranty, the exclusionary warranty offers the highest level of coverage.

Extended Car Warranties

An extended car warranty is similar to a car warranty, but it can be brokered by a third party. An extended car warranty can be purchased at any time, and it can be used to extend the length of a new car’s warranty, or you can purchase one to cover a used car. 

Many dealerships, car manufacturers, and outside companies offer extended car warranties. Extended warranties will not usually cover wear and tear or preventative maintenance on your car, and you may need to pay a deductible before the warranty will begin to pay out for repairs.

Penniless Parenting

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