Discount Warranties

Car Insurance vs Auto Warranty. Find the differences!

by , Auto Protection Specialist

warranty vs insurance

It’s important to understand the difference so you’ll know what kind of coverage and protection you need. It’s better to understand this upfront rather than be unpleasantly surprised later because you misunderstood what coverage you have.

Are they mandatory? One important distinction is that nearly every state requires you to carry auto insurance, but auto warranties aren’t mandated. The purpose is to make sure that if you cause an accident, and another person’s vehicle is damaged, or they suffer injuries, they’ll be compensated for their losses. The one state that doesn’t require auto insurance is New Hampshire, which requires you to prove that you’re able to pay for damages if you’re at fault in an auto accident.

Auto Insurance

Auto insurance is sold by many different companies. You pay a certain amount, called a premium, and in exchange, you’re covered in cases of collision, theft, or other damage. Your policy will have financial limits, so if the damage is beyond that limit, your insurance company won’t have to pay the additional amount.

Types of Auto Insurance

If someone else hits your car and it’s their fault, their liability insurance will pay for your car to be repaired. If you cause the accident, your collision insurance will pay for the damage. It will also pay for damage incurred by other drivers, if they’re uninsured or underinsured. If your car is damaged in other ways, your comprehensive insurance will pay for it. This type of auto insurance is optional, but it will pay in cases such as theft, vandalism, or if you hit a deer.

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Auto warranties

Auto warranties cover repairs that aren’t related to collisions or damage from outside sources. The repairs will be covered if they’re a result of a factory defect. New cars come with a factory warranty that covers certain parts of the car for a certain period of time or number of miles.

For example, one major automobile manufacturer has a 10 year/100,000 mile powertrain warranty that covers selected components of the engine and transmission/transaxle. It covers other components, such as paint and the audio system, for 5 years/60,000 miles. Other parts are covered for additional amounts of time. This basic warranty is included in the price when you purchase a new car – you don’t have to pay extra for it. Some used cars also have warranties backed by the company that sold you the car, but they’re only as reliable as the company offering the warranty.

Extended Warranties

Extended warranties can also be offered by car manufacturers, dealers, or other companies. If you’d like an extended warranty, you pay additional money, which can be paid upfront or folded into the car loan. You’re paying to have additional repairs or services covered. Depending on the specific extended warranty, you may have to pay a copay or percentage of the cost of each repair.

To Sum it Up

Generally, auto insurance and auto warranties offer different types of financial protection. Auto insurance covers you in case of a collision, and warranties cover certain components of the car. Car insurance will also help pay for physical injury that another driver may sustain in an accident that’s your fault. Each helps protect you financially from the potentially high costs involved with car repairs under certain circumstances.

Every repair your car may need certainly isn't covered, but insurance and warranties offer important protections that can be invaluable. If you cause an accident or have a problem with your car due to a manufacturing problem, you'll be covered. You may never make a claim with either one, but they serve as safety nets.

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How Do I Find the Best Extended Warranty Coverage?

The best way to prevent dealing with a problematic company, is to do your research before you agree to the coverage policy. The easiest way to do this is to take to the internet.

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