Mechanical breakdown insurance (MBI) is optional coverage, sold by some auto insurers, that helps pay to fix car parts that fail on their own after you pay a deductible. GEICO, for example, sells it as “a coverage on your auto policy.” An “extended warranty” is usually a vehicle service contract, bought separately from a dealer, manufacturer or independent company.
Whether MBI is worth the premium mostly depends on how much factory warranty you have left and whether you could pay a large repair bill from savings.
Key Takeaways
- MBI is insurance. GEICO and Mercury sell coverage they call MBI, and Progressive sells a similar coverage called Progressive Vehicle Protection. Some insurers, including State Farm, don’t list it.
- An extended warranty is usually a vehicle service contract, a separate agreement with its own price, deductible and cancellation terms. State rules for these contracts vary.
- Eligibility can be narrow. GEICO only adds MBI to new cars under 15 months old with fewer than 15,000 miles, and Progressive’s coverage is for vehicles less than 7 model years old in most states.
- Repair coverage does most of its work after the factory warranty ends. It makes the most sense if you’ll keep the car well past the warranty and a big repair bill would strain your budget.
How Mechanical Breakdown Insurance Works
MBI pays for covered repairs when a part fails mechanically rather than from a crash, theft or storm. You pay the deductible, and the insurer pays the rest of an approved repair. Rules differ by insurer:
- GEICO. Its MBI page says coverage can last “7 years or 100K miles.” Its eligibility page limits it to new vehicles under 15 months old with fewer than 15,000 miles, when you’re the first titleholder, and it isn’t sold in every state. See GEICO’s mechanical breakdown insurance.
- Progressive. Its mechanical breakdown page calls Progressive Vehicle Protection “an auto insurance coverage for newer cars.” The coverage page says it’s for vehicles less than 7 model years old in most states and requires Progressive liability, comprehensive and collision. See how Progressive Vehicle Protection works.
- Mercury. Its Mechanical Protection page says “Mercury Insurance offers MBI insurance” for “both new and pre-owned vehicles.” Its deductible and state list aren’t posted.
Progressive’s agency also refers shoppers to Good Sam mechanical breakdown coverage through Affinity Brokerage, LLC. Progressive says that coverage is “provided and serviced by a third party” and that Affinity Brokerage and the insurer “are not affiliated with Progressive.” Good Sam’s lineup also includes vehicle service contracts, so check which kind you’re buying.
Not every insurer sells MBI. State Farm’s website doesn’t list it, as RateFrog explains in whether State Farm offers mechanical breakdown insurance.
Exclusions look similar across insurers. GEICO’s claims page excludes “maintenance or wear and tear,” and GEICO doesn’t cover preexisting issues. Progressive excludes routine maintenance, and Mercury excludes “normal wear and tear items.”
MBI vs. Extended Warranty vs. Manufacturer Warranty
The FTC says an auto service contract, sometimes called an extended warranty, is “not a warranty as defined by federal law” because you buy it separately. A manufacturer’s warranty is “included in the price of a new vehicle.”
The legal difference decides who has to pay your claim. California’s Department of Insurance guide explains that with MBI, an insurance company is the “obligor,” legally required to pay for your repair. With a vehicle service contract (VSC), it’s a contract provider or the dealer. Oversight varies: California licenses providers through its insurance department, while Texas uses the Department of Licensing and Regulation.
| Compare | Mechanical breakdown insurance | Service contract (“extended warranty”) | Manufacturer warranty |
|---|---|---|---|
| Who sells it | Some auto insurers, such as GEICO and Mercury | Manufacturers, dealers and independent companies | The manufacturer, included in a new car’s price |
| What it is legally | Insurance | A contract, regulated differently by state. California doesn’t treat it as insurance. | A manufacturer’s promise to fix certain defects for a set time |
| Eligibility | GEICO: new, under 15 months and 15,000 miles. Progressive: under 7 model years in most states. Mercury: new and pre-owned (limits not posted). | Set by each contract | New cars, and some used cars with coverage left |
| Deductible | GEICO: $250. Progressive: $100 ($0 for minor dents or key fob replacement). | May apply to each repair | Check your warranty booklet |
| Where you get repairs | GEICO and Mercury: any licensed shop (GEICO sends warranty and recall work to a dealer) | Set by the contract. Some name authorized repair centers. | Set by the manufacturer |
| Cancellation | Progressive: anytime. GEICO’s and Mercury’s pages don’t say. | Set by the contract and state law. California makes every one cancelable. | Nothing to cancel |
Insurer terms can vary by state.
Is Mechanical Breakdown Insurance Worth It?
It can be, depending on your car and budget. Ask yourself:
- How much factory warranty is left? California’s guide says a breakdown the new car warranty covers “will not be covered by a VSC or MBI.” With GEICO, you start paying while the car is new, so count the overlap.
- How long will you keep the car? Progressive’s coverage can be renewed every six months until the car is eight years old. If you’ll trade in before the factory coverage ends, you may get little use from MBI.
- Could you cover a big repair from savings? If so, the premiums may add up to more than you’d collect. If a surprise bill would put you in a bind, MBI swaps that risk for a steady premium plus a deductible.
- What’s your model’s repair record? A car known for costly repairs makes the coverage more likely to pay off.
Example (GEICO’s numbers): On a $2,000 covered repair with a $250 deductible, GEICO says you pay $250 and it pays $1,750. Weigh that against the total premiums you’d pay over the years, which takes a quote since GEICO doesn’t publish prices. RateFrog explains what GEICO’s MBI covers, including its claims process.
Example (hypothetical): Two people buy the same new car. One will trade it in after three years and has an emergency fund. The other will keep it eight years with little saved. The first would mostly pay for years the factory warranty may already cover. The second has more to gain.
Questions to Ask Before You Buy
California’s guide says to read “the actual VSC you are thinking of buying, not merely a brochure or summary.” Do the same with an MBI policy, then ask:
- Who pays claims, an insurer or a contract provider, and is it licensed in my state?
- Can I use any licensed shop, and do repairs need approval first?
- Can I cancel for a refund, and can I transfer it if I sell the car?
For other coverage explainers, browse RateFrog’s car insurance guides.
Frequently Asked Questions
Does Regular Car Insurance Cover a Mechanical Breakdown?
Usually not. Progressive’s guide to mechanical problems says car insurance “doesn’t typically cover mechanical issues unless they’re related to a covered peril,” such as a crash or a tree branch falling on the car. Those claims go through collision or comprehensive coverage.
Do You Need Approval Before the Shop Starts Repairs?
With GEICO, usually. Its MBI page says you need authorization before repair work “in most states,” and its claims page says “DO NOT allow any repairs to begin until you obtain authorization from GEICO.” For a service contract, the FTC suggests asking whether repairs or towing need pre-approval.
Can You Negotiate the Price of an Extended Warranty?
In California, yes. The state’s insurance department says “you can negotiate the price of a VSC with a dealer,” while MBI prices are regulated and can’t be negotiated. It suggests shopping for MBI as leverage. The FTC says service contract prices “can range from several hundred dollars to several thousand.”
Sources
- GEICO: What Is Mechanical Breakdown Insurance?
- GEICO: Mechanical Breakdown Insurance Eligibility
- GEICO: Understanding Mechanical Breakdown Claims
- Progressive: Mechanical Breakdown Coverage
- Progressive: Progressive Vehicle Protection
- Progressive: Does Car Insurance Cover Mechanical Problems?
- Mercury Insurance: Mechanical Protection
- FTC: Auto Warranties and Auto Service Contracts
- California Department of Insurance: Guide to Automobile Service Contracts, Extended Warranties and Other Repair Agreements
- Texas Department of Licensing and Regulation: Service Contract Providers FAQ