What Is Car Repair Insurance?

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Car repair insurance is a form of extended warranty that is typically offered by third parties when a used vehicle is purchased. It is also possible to obtain car repair insurance for a new vehicle to supplement the manufacturer's warranty or for an existing vehicle at virtually any time. Repair insurance is sometimes offered by dealers or manufacturers, though the issuing company is typically a third party insurance business. This type of coverage may be obtained for major repairs only or for all minor repairs and even preventative maintenance. Policies with larger deductibles are typically less expensive.

Unlike other forms of insurance, car repair coverage is typically paid for with a lump sum at the time it is purchased. The amount is usually calculated based on the type and age of the vehicle and the kinds of repairs that are covered. This is different than health insurance, homeowner's insurance, and other types of policies that require a premium be paid on a regular basis.

In order to make use of a car repair insurance policy, the company typically must be contacted for approval. This is usually done by the repair facility after an estimate has been created. The car repair insurance company can then determine whether the required repair is covered under the policy, and will either grant or deny authorization. In some cases the policy holder will pay the repair facility and be reimbursed later by the insurance company, though the insurer will sometimes provide a credit card or other means of direct payment.

A car repair insurance policy can be designed to cover major repairs, all repairs, or anything in between. Major repairs, such as engine or transmission overhauls or replacements, can be incredibly expensive, so a car repair insurance policy can help defray such costs when purchased along with a used vehicle with an unknown history. Other policies can be designed to cover everything from regular fluid changes to wear items such as brakes, belts, and hoses. There may also be a deductible that the policy holder needs to pay each time, rendering the insurance useless for repairs that cost less than that amount.

All new vehicles come with some type of warranty, though the length and what it covers can vary from one manufacturer to another. Some original warranties last for ten years or more and cover a variety of different repairs, while others last only one year and cover nothing but major drive train components. These warranties often transfer to the new owner if a vehicle is sold, so it is always a good idea to investigate what types of repairs the manufacturer will cover before purchasing aftermarket insurance.