Car Warranty vs. Car Insurance: What’s the Difference- Car warranty and auto insurance are both advantageous options that protect automotive repair expenses in various scenarios. While these two have several similarities, most people often mistake them for each other. It is important to ask what the difference is between a car warranty and car insurance and understand how they work and what they cover before proceeding with any of them.
If you have a car warranty, it may cover some types of issues, like mechanical failures in your car. Car insurance also covers several issues for your car, but car warranty coverage is different from what car insurance covers. This write-up contains the differences between a car warranty and car insurance and how to identify which is best for you.
What is a Car Warranty?
A car warranty is a type of coverage offered by manufacturers or car dealers after a new car is purchased. A car warranty covers some types of car repairs and replacements for damages due to defective components or workmanship defects. Car warranties usually have a limited term, which means at the end of this term, you will lose your coverage.
This coverage cannot be renewed; instead, any damages that occur after the term ends will not be covered. Furthermore, most car warranties do not cover damages due to car accidents, routine maintenance, and wear-and-tear parts replacements.
Extended Car Warranty
An extended car warranty is an option that covers your new vehicle more than the factory warranty. An extended warranty can be purchased from your car manufacturer, or you can consider an aftermarket option from a third party. On this warranty, you will likely pay deductibles when you file claims. However, some companies offer these plans with no required deductible.
How Much Does a Car Warranty Cost?
New car warranty coverage comes with no required cost when a new car is purchased. Extended car warranties are, however, optional purchases you are to pay for. While extended car warranties can be paid fully beforehand, most third-party providers allow new car owners to pay monthly on the service contract. However, the average cost of an extended car warranty is $3,026.
What is Car Insurance?
Car insurance pays for car damages and bodily injuries after the occurrence of an accident. Car insurance covers car repairs in most cases where your car gets damaged. Or destroyed, or stolen due to other events like natural disasters.
In addition, car insurance is not an optional type of insurance coverage. Instead, it is mandatory in all states by law for all drivers to have the minimum insurance coverage to be legal driver. Unlike car warranties, car insurance is not offered by the car dealer or manufacturer. Instead, it is purchased from insurance providers, and it covers a wider range of issues.
How Much Does Car Insurance Cost?
The average cost for a full-coverage car insurance policy is $2,008 annually or $167 monthly. While the average cost for a minimum-coverage policy is $657 yearly and $52 monthly. However, how much car insurance costs varies based on several factors like car type, driver’s age, credit history, driver’s gender, and location. Insurance companies use these factors to determine the level of risks you pose and how much premiums you will be charged.
Car Warranty vs. Car Insurance: What’s the Difference?
As previously stated, these two are both valuable protection against repair costs in several cases, and they share several other similarities; they are different from each other. Car warranties cover issues due to mechanical breakdown from faulty workmanship or defective parts. Car insurance offers protection against several costs, like medical bills and car repair costs, in the instance of an accident.
Some car insurance providers offer mechanical breakdown insurance coverage, which is similar to that of an extended car warranty. While this insurance coverage can be more affordable. It does not offer benefits like roadside assistance or towing, which are the normal standards with extended warranty providers.
Do I Need Car Insurance?
As previously stated, car insurance is not an optional coverage for your vehicle because it is mandatory in all states. This coverage shields persons involved in car accidents who are not found at fault and holds drivers responsible for the risks they pose when they drive. However, how much coverage you need depends on your state and location. You may decide to purchase a higher level of coverage than the state-mandated level.
Do I need an extended car warranty?
Unlike car insurance, extended car warranties are completely optional, and it is your choice whether or not you should purchase them. Purchasing this warranty offers you customizable coverage options, helps you save on repairs, and allows you to drive your car longer.