Does Your Car Insurance Cover Vehicle Repair Cost

There are a few different types of protection that can apply to a car: there's auto insurance, which the owner is generally required by law to have. A new car purchase typically comes with a factory warranty, essentially guaranteeing the quality of the dealer's product for a predetermined number of years and/or miles. Finally, there's coverage in the form of a Vehicle Service Contract (VSC), which is designed to help pay for scheduled repairs on mechanical breakdowns.

Of these three different items, only auto insurance is generally required. Is it worthwhile to buy a VSC?

Yes, and here's why: car insurance is vastly different from a VSC, and both can be extremely useful to have in certain situations.

Let's explore each coverage type more in-depth to understand specifically how and where they differ.

Car insurance for damages caused by external forces

At its most basic definition, car insurance is a contract between the car owner and the insurance company protecting the owner against auto-related damages caused by external forces, e.g. an accident. Depending on the insurance policy, coverage may be extended in the event of:

  • a collision
  • an accident
  • vandalism
  • theft

An auto insurance policy typically includes the following coverage types (please note that state laws vary and not all coverage types are available in every state), which are subject to the terms and conditions of the insurance policy, including any limitations or exclusions:

  • Collision: Pays to fix or replace your vehicle after accident-related damages.
  • Liability: If you are at fault in a collision or accident, liability insurance will pay for the other party's vehicle fixes and/or medical bills in the event they suffer an injury. Liability insurance does not cover you or your vehicle.
  • Comprehensive: Covers your car against specified damages not caused by a collision or accident (e.g. certain natural disasters or car robbery). If you financed your car, your lender may require you to get comprehensive insurance.
  • Personal Injury Protection (PIP): Covers your medical expenses in the event of an accident, independent of whether you're at fault or not.

Vehicle service contracts for damages caused by breakdowns

VSCs will protect you from the cost of repairs in the event a covered mechanical breakdown. Like insurance, VSCs may require you to pay a deductible before the plan pays for a covered repair. VSCs also generally have per-repair and aggregate dollar-amount limits on what they’ll pay the shop.

What constitutes a mechanical breakdown?

Your vehicle is comprised of thousands of individual components working together to power your drive. Generally speaking, a mechanical breakdown takes place when one of these parts or components stops functioning due to internal reasons within your car. 

Some examples of mechanical breakdowns may include:

  • You're driving along the highway and for no apparent reason, your engine begins sputtering to a stop.
  • Your "Check Engine" light comes on the dashboard and after taking your car to an auto repair shop you find out you've experienced transmission failure.
  • You go to turn on the air conditioner in your car, but nothing happens when you power it on.

All these examples could fall under coverage specific to your VSC plan, depending on its terms.

Get a Vehicle service contract for mechanical breakdowns

Without car repair coverage in place, it's not hard to imagine car repair bills quickly piling up. While car insurance is generally a legal requirement, it is only designed to cover damages from accidents and external forces, and typically doesn’t pertain to the breakdown of operating parts of the vehicle itself.

To combat costly repair bills from mechanical breakdowns, consider a Vehicle Service Contract (deductible and plan limits apply). A VSC pays for covered parts, labor, and VAT. Some VSC providers also require no money down and offer affordable pay-as-you-go monthly payments. Note that administrative fees may apply upon cancellation.