Extended warranty programs for cars have different ways of covering repairs. Some require you to get pre-approval before making any repairs and will reimburse you for the cost. Others work directly with the store and are paid directly. Extended coverage companies don't cover pre-existing conditions because companies would go bankrupt if they were covered.
It's similar to your health insurance provider not accepting pre-existing medical conditions. You can't call Blue Cross Blue Shield to take out a policy while you're in the ambulance on your way to the hospital. Like an extended warranty, auto repair insurance covers mechanical breakdowns and repairs that auto insurance doesn't pay for. On the other hand, repairing the less common and most catastrophic mechanical faults can often cost several thousand dollars.
However, a VSC offers repair coverage for your vehicle after the manufacturer's warranty expires. It's also worth noting that the AAA Vehicle Protection Plan is technically a service plan for vehicles, offering the same coverage as an extended warranty. Like extended warranties, mechanical failure insurance covers damage to a vehicle's major systems, including the engine and transmission. However, there may be some situations where coverage doesn't start until you've received the car.
As you can see, there are a few things to keep in mind when it comes to extended warranties and pre-existing conditions. If you purchase a transmission warranty, you'll likely pay less for coverage than you would for comprehensive coverage. Rather than buying an extended warranty, you'd be better off spending your money on paying a little more for a car whose expected reliability is better than average. Many insurance companies also offer an alternative to extended warranties called mechanical fault insurance (MBI).
Powertrain warranties cover the parts that set the vehicle in motion, including the engine, transmission, driveshaft, axles and differential. Automate a transfer from your checking account to your emergency savings account every time you receive a payment to quickly build up a cash reserve. Most people who purchase an extended warranty save less on repairs than they pay for the contract, according to a Consumer Reports survey. If you want to buy an extended warranty for your car, you should get quotes from several sources to find the best price.
For more information, see WalletHub's guides on insurance against mechanical breakdowns and extended car warranties.
