What is the difference between extended warranties and car insurance?

The difference between extended warranties and car insurance has to do with what is covered. Extended car warranties cover mechanical failure repairs while car insurance covers impact-related issues such as collisions or theft, fire, and a natural disaster. Read on further as we get into the details of what both extended car warranties and car insurance cover.

What does an Extended Car Warranty Cover?

New vehicles are sold with manufacturer warranties or OEMs (original equipment manufacturers). This warranty is designed to protect your vehicle against major repairs and workmanship defaults. An extended car warranty is a vehicle service contract (VSC) meant to extend the car’s original sale coverage.

Your standard VSCs are offered under two standard plans with some variations. They are a powertrain warranty plan or a bumper-to-bumper warranty plan. Third-party extended warranties for vehicles often have better benefits and at times last longer than the OEM warranty.

Powertrain warranties cover the transmission, engine, and axles. Keeping the parts that power your car are covered in case of unforeseen repairs. Bumper-to-bumper warranties cover the same parts plus other essentials such as navigation systems, power seats, onboard computers, and other electronics.

What do car insurance policies cover?

Car insurance protects you, your family, and your car in the event of a collision. While also providing financial protection for  you where you are liable for people and vehicles that incur injuries or damage. Car insurance plans may also include options for medical protection in case of injury for you or your passengers.

Car insurance coverage is generally required to some degree in most states. It is important to check what policies are a requirement in your state before purchasing a vehicle. For the most part however all types of policies are available in the various states. Here is a list of the basic coverage packages and what they generally cover:

• Liability coverage: paying towards damages and injuries where you are found liable.
• Comprehensive: complete coverage that will pay towards events outside of your control such as windshield damage, natural events, vandalism, and theft.
• Collision coverage: provides cover in case of a collision with another vehicle or object such as a fence.
• Personal Injury Protection (PIP): pays towards bodily injury to you or your passengers but note that this coverage is only available in some states.
• Uninsured/underinsured Motorist Bodily Injury (UIM): covers you and your passengers for bodily harm when an uninsured or underinsured driver collides with your vehicle.

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