What Is Mechanical Breakdown Insurance?

Mechanical Breakdown Insurance (MBI) is a service contract that covers the cost of certain vehicle repairs. This coverage typically becomes relevant after a manufacturer’s warranty expires or for vehicles where such a warranty is no longer applicable.

Understanding Mechanical Breakdown Insurance

MBI is a contractual agreement, distinct from traditional auto insurance policies like liability or collision coverage. It primarily protects against the financial burden of unexpected mechanical failures that are not related to accidents or routine maintenance. Providers of MBI can include insurance companies, third-party administrators, dealerships, or credit unions.

This coverage is specifically for internal mechanical issues, such as a transmission failing or an engine malfunction.

What Mechanical Breakdown Insurance Covers

Mechanical Breakdown Insurance policies typically cover major systems and components that are expensive to repair or replace. These often include the engine, transmission, drive axle, steering, air conditioning, and electrical systems. For example, issues with internal lubricated parts of the engine, the transmission’s gears, or electrical system malfunctions would generally fall under MBI coverage.

However, MBI policies do not cover everything. Exclusions commonly include routine maintenance, such as oil changes, tire rotations, or brake pad replacements, as these are considered regular upkeep. Wear-and-tear items like belts, hoses, and spark plugs are also not covered. Furthermore, MBI does not cover damage resulting from accidents, collisions, misuse, lack of proper maintenance, or pre-existing conditions.

MBI vs. Other Vehicle Coverage

Mechanical Breakdown Insurance differs significantly from both manufacturer’s warranties and standard auto insurance. MBI is often purchased once a manufacturer’s warranty approaches its expiration or has already ended, serving as a continuation of protection against mechanical failures. While both cover mechanical issues, MBI is typically a separate contract offered by insurance companies or third parties, rather than the vehicle manufacturer. MBI can also offer broader coverage than some extended warranties, which might only cover manufacturing defects.

Standard auto insurance, encompassing collision, comprehensive, and liability coverage, addresses damage from accidents, theft, natural disasters, or responsibility for harm to others. These coverages are complementary, with standard auto insurance handling external damage and MBI focusing on internal mechanical failures.

Key Policy Elements of MBI

MBI policies come with specific terms and conditions. Eligibility for MBI often depends on vehicle criteria such as age and mileage. For instance, some providers require vehicles to be less than 15 months old and have fewer than 15,000 miles at the time of purchase, with renewal possible for up to seven years or 100,000 miles. Older vehicles or those with high mileage may have limited eligibility or require alternative service contracts.

Policies typically include a deductible, which is the amount the policyholder pays out-of-pocket per claim or repair visit before coverage begins. Common deductibles can be around $250, though some may be as low as $50. Coverage limits exist, which may be per-claim, aggregate, or based on the vehicle’s value. Many policies also impose a waiting period after purchase, ranging from a few days to a month, before coverage for repairs becomes active.

When filing a claim, the general process involves obtaining authorization from the MBI provider before repairs commence and taking the vehicle to an approved or licensed repair facility. Many MBI policies are transferable to a new owner if the vehicle is sold, potentially increasing its resale value. Policyholders can generally cancel their MBI coverage at any time, often without a large financial penalty.