Car Warranty Insurance - Do You Need It?
Want to know what a warranty insurance is or maybe isn’t? Stick around to clear all misapprehensions around the topic.by Bhavik Sreenath, on LISTEN 08:02
In this article, we take a look at car warranty insurance and everything there is to know about it. This includes breaking down the differences between a car warranty and car insurance to help you decide what’s best for you.
What Is Car Warranty Insurance?
The term "Car Warranty Insurance" is one of the most commonly searched terms and it is also a misnomer. The terms Warranty and Insurance represent two very distinct forms of coverage, both with their pros and cons, and perform very specific functions and generally, people searching for Warranty Insurance are referring to a car warranty.
What is a Warranty?
A Warranty by definition refers to a written assurance offered by a manufacturer or a warranty provider on a car that provides coverage on key components of the vehicle. In case any of the components under warranty fail, it guarantees free of cost replacement or repair of the specified components that fall under the warranty for a limited amount of time. Warranties can be broadly classified into two categories, factory, and extended warranty.
What is a Manufacturer Car Warranty
A manufacturer warranty by definition refers to a written assurance offered by the manufacturer on a new car which states that a car’s parts will work as promised for a designated period. If not, it guarantees free-of-cost replacement or repair of key components that fall under the warranty for a limited amount of time. The duration of a manufacturer warranty can vary anywhere between one and five years depending on the make and model of the vehicle.
The components covered under a warranty may vary from manufacturer to manufacture but a factory warranty usually covers components like powertrain i.e engine and transmission, major electrical systems, and in some cases, factors like corrosion and emission coverage are also included.
What is an Extended Car Warranty
An extended warranty refers to a service contract that covers a range of repairs after the manufacturer’s warranty is over. The coverage of an extended warranty program usually begins after the expiry of the manufacturer’s factory warranty program. A typical Extended Warranty program covers repair and replacement costs of electrical and mechanical components, which in some cases include problem areas not covered by the manufacturer.
A warranty program can last anywhere from one to eight years and most manufacturers offer in-house extended warranty programs while you purchase your vehicle. Both third-party and manufacturer warranty programs start from as low as $1000 and pre-repair deductibles reach as high as $100.
How Is A Car Warranty Different From Car Insurance?
Though both an insurance and a warranty are designed to provide coverage, the approach and kind of coverage vary greatly. For starters, a car warranty is meant to provide coverage for breakdowns and failures that occur through no fault of the owner, within the warranty period. Issues with major systems like the powertrain, safety components, major electrical components are some of the major areas that a warranty is supposed to cover.
An insurance policy on the other hand is designed to provide coverage in case of an accident. To elaborate, it is supposed to cover repair costs if your vehicle is damaged in a collision, theft, natural calamity, or any other unnatural occurrence. Every motorist is mandated by law to insure their vehicle, unlike an optional warranty.
Since a warranty and insurance offer very different kinds of coverage, most people choose to purchase a warranty along with insurance to ensure well-rounded coverage for their vehicle that could save them a lot of money in the long run.
Is An Extended Car Warranty Worth It?
Warranty coverage can come in handy if you don’t want to spend money later or choose to purchase a vehicle that costs higher than usual to run and maintain. In cases of affordable and reliable cars, the warranties might not be as useful especially if you walk around with enough savings to cover occasional repair bills. Before buying an extended warranty make sure you evaluate providers based on cost, coverage, and convenience. Also, don’t forget to compare policies and negotiate to get the best possible deal.
What’s the Difference Between a Dealership and Third-Party Extended Warranty?
Dealership Extended Car Warranty
All established auto manufacturers offer extended warranty programs available at the dealership level and they insist their plans be the best suited for the vehicle and promise to offer a hassle-free experience when you do run into a problem. They can also be added at the time of purchase making it the least cumbersome option when it comes to extended warranties however you will end up paying interest on it if you go for any form of financing at the time of purchase. So consider a manufacturer plan in cases where you plan to pay for your car upfront.
Third-Party Extended Car Warranty
Third-party warranty providers on the other hand tend to make their plans more attractive, at least on paper, by offering added benefits such as the convenience of choosing your preferred repair shop, affordable plans with flexible payment options, the ability to opt-in even after the manufacturer’s factory warranty runs and more which isn’t something that a manufacturer cannot match by design. However, processing claims and tying up with your local repair shops might not be as seamless an experience like the one offered by a dealership. So consider a third-party warranty only after studying the claim process and speak to your nearest repair shop for the best possible results.
What Are The Top Extended Car Warranty Providers?
When it comes to third-party warranty providers, we strongly recommend getting in touch with them to try and get the best deal since most of them will offer you a discount over the quoted price if you ask for one. Olive and Endurance are some of the best third-party warranty providers that offer the option of transferring ownership. Here’s a brief review of these providers:
Uproar is based out of Seattle, Washington, but it’s not like any other extended car warranty company out there. Uproar bills itself as an innovator, which makes a lot of sense considering it’s the first extended warranty company to offer a 100-percent digital, subscription-based experience. The main highlights of uproar include an instant quote and signup online, same-day coverage, no long-term commitments, transparency, and no aggressive salespeople or robocalls. They are BBB accredited and have five-star ratings from both Google and Consumer Affairs.
Olive is one of the newest players in the business, apart from extended warranty plans, it also offers mechanical breakdown insurance in California. It has also secured some of the best consumer ratings courtesy of its top-notch service and a wide range of plans that deliver timely resolution of claims.
They offer Coverage for cars up to 20 years old which makes it ideal for used car owners. They offer hassle-free inspection after which the claim can be filed, making the entire process foolproof and they aim to ensure that you don’t miss minor details which might cause you trouble in the future. They also offer membership benefits which add to the whole customer experience and help them secure the top spot.
They offer coverage for cars with up to 250,000 miles which makes them a great choice for people who plan to purchase a warranty for their heavily used vehicles. They offer a wide range of policies some of which offer industry-leading claim filing processes. With an A+ rating from the Better Business Bureau, CARCHEX should be on your list when shopping for an extended warranty.