Mechanical breakdown insurance (MBI) is a form of auto insurance designed to cover auto repairs once your vehicle's factory warranty expires. This type of policy can be purchased through an insurance company or agent and either is included in your current auto insurance policy or paid for separately.
Like most types of insurance policies, the typical MBI policy requires a deductible (GEICO's MBI, for example, has a $250 deductible) and then covers the entire cost of repair up to your policy limits.
MBI vs. manufacturer's or extended warranty
The average manufacturer's warranty lasts for three years or 30,000 miles, whichever comes first. Car buyers also have the option of purchasing an extended warranty once the original warranty expires. While a manufacturer's warranty covers most of what could go wrong with the car, extended warranties often are much more limited and typically apply only to certain car parts.
MBI, on the other hand, offers broader coverage as long as the policy is in place. What it covers will vary, depending on the policy. For example, Digital Federal Credit Union's MBI policies cover things like the battery, the air conditioner, manual and automatic transmissions, the radiator and the engine.
MBI does not cover routine maintenance, such as oil changes.
Pros and cons of MBI
MBI offers a number of advantages over extended warranties, including:
- Affordability. While extended warranties can cost a large lump sum, MBI costs are limited to a monthly premium and a deductible.
- Flexible coverage. MBI is not limited to specific parts of the vehicle and is similar to a factory warranty. Also, you can choose which repair shops and mechanics you use, according to Digital Federal Credit Union.
Although you can renew the policy up to a certain mileage, you must buy MBI when the car is still relatively new. For example, GEICO's MBI must be purchased when your vehicle has less than 15,000 miles on it. California's Insurance Center Associates requires that MBI for new cars be purchased at least one month (or 1,000 miles) before your manufacturer's warranty expires; for used cars, MBI must be purchased within 21 days of the sale, and the car must have fewer than 90,000 miles on it.
Is MBI worth it?
MBI may be a good investment for drivers who plan on keeping their cars for a long time or who buy a qualifying used car that has an extremely limited warranty.
But if you don't put a lot of wear and tear on your car or if you buy or lease a car every few years, the chances that you'll use your policy are small -- and you'd probably be better off saving the money you would spend on an MBI policy.