Car extended warranty and insurance: Explore all facts

Extended warranty and insurance on cars

What is a car warranty? 

A standard car warranty is an assurance by the OEM (Original Equipment Manufacturer) to replace/repair any faulty components, and it is offered by the OEM when you buy a new car. An extended car warranty extends the coverage of the standard warranty scheme that comes with the new car. Purchasing an extended warranty for your car is optional.

What is car insurance?

Car insurance is an agreement between you (policyholder) and the insurance company. You pay a premium in exchange for financial backup against vehicle damages or third-party liabilities as per the chosen coverage. It is mandatory to buy a Third-party Car Insurance plan when you purchase a vehicle. However, for exhaustive coverage, you can opt for a Comprehensive Car Insurance plan that provides both Third-party and Own Damage coverage.

What is an extended warranty on cars?

Every new car that rolls out of the showroom comes with one standard feature, which is a standard warranty. It is a written assurance made by the car manufacturer to repair/replace any faulty components (mechanical/electrical), provided it meets the terms and conditions of the scheme. The warranty schemes vary from one manufacturer to another. For example, it may be a 2-year/50,000 km warranty or a 3-year/unlimited km warranty. It depends on the manufacturer.

But what will happen once the standard warranty scheme expires? That’s when the extended car warranty plan comes into the picture. It is an additional warranty plan that you can opt for while buying a new car. In some cases, you can even opt for this plan before the standard warranty expires. The extended warranty also guarantees repairing/replacing defective parts in a car, just like the standard plan, but for an extended period.

Coverage

The coverage of an extended vehicle warranty plan varies depending on the manufacturer and the model. However, below are some of the coverage options that almost all manufacturers offer with such a plan.

• It covers the engine and electrical components.

• It covers labour costs if there is complicated repair work or part replacement.

Exclusions

Although the extended warranty scheme is an extension of the standard warranty plan, it does not cover all the aspects of a car. There are some exclusions that are mentioned below.

• It does not cover regular service and maintenance.

• It does not cover wear and tear components such as clutch, brake pads, suspension, etc.

• Paint, rusting, degradation of seat upholstery and any other component that wears due to age are not covered under this warranty plan.

• Damages to the car due to an accident or natural calamities (earthquakes, floods, rodent infestation, etc.) are not covered.

• The plan does not provide coverage if you modify the electricals, fit aftermarket accessories or service the car at a non-authorised service centre.

How to buy an extended warranty?

You can purchase the extended warranty on cars when you are buying a new vehicle. However, there are other options too, which are explained below.

• You can purchase the plan through the dealership or manufacturer.

• It is better to opt for an extended warranty plan when buying a new car to get a better deal.

• You can also buy extended warranty on cars before the standard plan expires. However, some manufacturers have a time limit for such upgrades.

• Also, before opting for such a scheme, thoroughly go through coverage details and ensure that it provides adequate coverage for your car.

• Lastly, do check for third-party extended warranty plans, as you may get a better deal.

Need for an extended car warranty

Opting for an extended warranty plan purely depends on your requirements. For instance, if you do not plan to use the car for a long time, buying such a warranty coverage may not make sense. However, it can increase your car’s value and help you to get a better deal for your used car.

On the contrary, if you wish to use the car for an extended period, buying an extended warranty is a better option. Modern vehicles are reliable, but after 2-3 years, the mechanical/electrical components may fail. That’s when the warranty coverage comes to your rescue.

Things to consider while buying warranty

Here are a few points that you should consider when buying an extended warranty package for your car.

• If you use your car occasionally, then the extended vehicle warranty package may not be beneficial. But bear in mind that the standard plan is valid only for a few years/km.

• If you drive a diesel car or use the vehicle extensively, buying an extended warranty scheme is a sensible option. Generally, diesel engines comprise complex parts, and the repair work is also complicated.

• If you wish to sell the vehicle after a year or two, there is no point buying such a warranty plan. However, an extended warranty plan can get you a better resale value for your used car.

• If you stick with the manufacturer’s authorised service centre to maintain the car, buying an extended warranty coverage is ideal.

• Evaluate the after-sales service and the market reputation of the manufacturer before opting for such a plan.

Pros & cons of extended warranty

Below are the advantages of buying an extended car warranty.

• Save on repair costs: If a major component (engine, gearbox, electronics) of your car suffers failure, the repair costs can run very high. But with an extended warranty scheme, you need not worry about labour charges, cost of repair or replacement of parts.

• Retain the car for a longer time: With extensive warranty coverage, you can retain the car in top-notch condition for several years. It works out very well if you intend to use the vehicle for the long term.

• Flexible plans: Modern cars are equipped with advanced technologies. And, to cover that aspect, the car manufacturers are offering flexible extended warranty packages. You can choose which components you want to cover. However, there are specific exclusions that are already discussed above.

Here are some of the cons of an extended warranty plan for a car.

• Upfront cost: Purchasing an extended vehicle warranty package may cost you a significant amount of money. You have to be sure that you need such a plan before you invest your hard-earned money. It is an excellent choice to go for an extensive coverage plan, but ensure that you don’t end up spending too much while purchasing your new car.

• There are exclusions: When we say extended car warranty, it doesn’t mean that the manufacturer will cover all the vehicle components. Generally, the manufacturer excludes all the significant wear and tear parts such as brakes, clutch, suspension, etc. Repairing these components may be expensive, depending on the extent of the damage.

• You may not use the coverage: It is unlikely that a modern car suffers a major failure in just a few years. So, the chances are you may not use the benefits of the extended warranty scheme. So, check about the vehicle’s history and ownership reviews before opting for such a warranty plan.

Difference between new car warranty and extended warranty

The below table highlights the key differences between a new car warranty plan and an extended warranty package.

What is car insurance?

Car insurance is an agreement between you (policyholder) and the insurer. You pay a premium to the insurance provider in exchange for coverage benefits such as Third-party Liability and Own Damage cover. These covers offer financial protection in case of a mishap. It is mandatory to opt for a Third-party Car Insurance plan to comply with the legal requirements. Whereas a Comprehensive Policy is optional, it offers broader coverage.

Coverage

Below are the inclusions of a Comprehensive Car Insurance plan.

• Third-party liabilities (Property damage or injury/death),

• Vehicle damages due to accidents.

• Vehicle damages due to fire accidents.

• Theft of the vehicle.

• Total loss (damaged beyond repair).

• Vehicle damages due to natural calamities (floods, earthquakes, etc.) or man-made calamities (vandalism, riots, etc.).

Exclusions

Here are some of the exclusions of a car insurance plan.

• It does not cover wear and tear of parts.

• Mechanical or electrical failures.

• Driving the vehicle in an inebriated state.

• Driving the car without valid documents.

• Driving without an active insurance plan.

How to buy car insurance?

You can purchase a car insurance plan offline or online. The most convenient mode of purchase is online since you need not deal with paperwork or documentation. Moreover, you can compare different policies online before opting for a car insurance plan. All you need to do is visit the insurer’s website, fill in your vehicle details, select the policy and pay the premium online.

Benefits of car insurance

Below are the benefits of a Comprehensive Car Insurance policy.

• It provides a financial backup in case of damages to your car due to an accident, fire, man-made calamities or natural calamities.

• The insurer will pay you the IDV (Insured Declared Value) if your car is damaged beyond repair or stolen.

• Covers costs arising due to third-party liabilities.

• Ensures that you comply with the rules and regulations.

Extended warranty vs insurance

Here are the key differences between warranty and insurance.

Takeaway

An extended car warranty plan and a car insurance policy may be confusing as both offer similar benefits. But remember that the warranty package is exclusive to the car, whereas an insurance plan covers beyond the bounds of a vehicle. Also, an extended warranty package is optional, but it is compulsory to insure your vehicle. You can opt for an extended car warranty coverage depending on your usage and requirements. Lastly, it’s better to opt for an extended warranty package during the new car purchase as you may get a better deal.

Frequently asked questions

Below are some of the most commonly asked questions related to car extended warranty and insurance.