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Understanding Car Insurance and Car Warranties: A Comprehensive Guide
When it comes to protecting your vehicle, understanding the differences between car insurance and car warranties is crucial. Both offer valuable coverage, but they serve different purposes. In this comprehensive guide, we’ll explore what car insurance and car warranties are, how they compare, and why you might need both. Plus, we’ll introduce you to O1ne Mortgage, your go-to source for all your mortgage service needs. Call us at 213-732-3074 for more information.
What Is Car Insurance?
Car insurance is a mandatory requirement in nearly all states, designed to protect you financially if you cause an accident. You can purchase coverage directly from an insurance company or through an agent. Depending on the types of coverage you have, your policy may help pay for injuries, vehicle repairs, and your legal liability after an accident.
The average cost of auto insurance is $147 per month, or $1,759 per year, according to The Zebra. However, the cost can vary dramatically based on the types of coverage you purchase, the policy limits you choose, your driving record, where you live, and other factors.
Types of Car Insurance Coverage
A standard auto insurance policy often includes six main types of coverage. However, you may choose to include additional coverage options for greater protection.
- Liability: Pays for injuries and property damage you cause to someone else after an at-fault accident. It’s required by law in almost every state.
- Uninsured/Underinsured Motorist (UI/UIM): Protects you if you get hit by a driver who doesn’t have insurance or whose policy limits are too low to cover the damage they cause. Some states require this type of coverage, and it’s optional in others.
- Medical Payments (MedPay) / Personal Injury Protection (PIP): Helps pay for injuries you and your passengers sustain during an accident, no matter who is at fault. PIP may also cover additional expenses, such as child care or lost wages.
- Collision: Helps pay for repairs to your vehicle caused by a crash, vehicle rollover, or pothole. Lenders typically require this coverage if you have an auto loan or lease.
- Comprehensive: Pays for damage from incidents unrelated to a crash, such as severe weather or vandalism. Lenders and leasing companies usually require it if you have an auto loan or lease.
What Is a Car Warranty?
A car warranty helps pay for repairs to your vehicle related to a mechanical failure or defect, not an accident. In general, there are two types of warranties: the manufacturer’s warranty and extended warranties.
Manufacturer’s Warranty
A manufacturer’s warranty comes with the purchase of a new vehicle. Used vehicles may or may not have a manufacturer’s warranty, so be sure to check before you buy. A manufacturer’s warranty typically has at least two components: bumper-to-bumper and powertrain. The bumper-to-bumper component covers most repairs except those related to normal wear and tear, and the powertrain warranty covers repairs for parts in the powertrain system, such as the engine and transmission.
Manufacturer’s warranties are good for a specific number of years or miles, and the bumper-to-bumper warranty typically expires before the powertrain. Warranty lengths vary, but it’s common for manufacturers to offer bumper-to-bumper warranties for three years or 36,000 miles and powertrain warranties for five years or 60,000 miles.
Extended Warranty
Unlike a manufacturer’s warranty, extended warranties aren’t included in the purchase of a vehicle, but you can buy an extended warranty at any time. Extended warranties are available from dealerships or third-party vendors and typically kick in when the manufacturer’s warranty expires. Depending on when you purchase the plan, both warranties may be active simultaneously.
To receive payment for repairs, you generally need to file a claim with the warranty company. Some plans have deductibles you must pay before receiving payment for covered services and restrictions on where you can take your car for repairs. Cost, covered services, and warranty length can vary significantly by provider, so be sure you understand how the plan works and compare multiple quotes before purchasing one.
How Do Car Warranties and Car Insurance Compare?
Insurance and warranties cover different services, and one can’t be used in place of the other. Here’s a quick look at how they stack up:
| Car Insurance | Car Warranty |
|---|---|
| Required by law: Yes, in most states | Required by law: No |
| Covers physical damage caused by an accident or other covered event such as severe weather: Yes | Covers physical damage caused by an accident or other covered event such as severe weather: No |
| Covers your legal liability to other drivers: Yes | Covers your legal liability to other drivers: No |
| Covers routine maintenance: No | Covers routine maintenance: No |
| Covers mechanical issues: No | Covers mechanical issues: Yes |
| Age and mileage restrictions: No | Age and mileage restrictions: Yes |
| Deductible required: Typically | Deductible required: Sometimes |
The Bottom Line
If you own a car or plan to buy one, insurance and warranties can help protect you from expensive repair bills, but warranties and car insurance differ in the coverage they provide. Extended warranties are appealing to some, but it’s a good idea to weigh the cost of an extended warranty against the cost of potential repairs and consider the likelihood you’ll use it to help you decide if buying one makes financial sense.
If you’re considering updating your insurance policy to save money or for an additional level of coverage, be sure to compare multiple quotes from different providers to find one that fits your needs.
Contact O1ne Mortgage for Your Mortgage Needs
At O1ne Mortgage, we understand that navigating the world of car insurance and warranties can be complex. That’s why we’re here to help you with all your mortgage service needs. Whether you’re looking to buy a new home, refinance your existing mortgage, or need expert advice, our team is ready to assist you. Call us today at 213-732-3074 to speak with one of our experienced loan salespersons and discover how we can help you achieve your financial goals.
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