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Car Warranty vs Car Insurance – Know which is Better

Car warranty and insurance come in handy for both new and used cars. But there may be a few doubts as to which one has a higher significance or what they offer. This blog highlights the essential points to keep in mind about the two, their key differences, and the better one to opt for. 

Warranty 

When we purchase a new car, the manufacturer or the seller promises to replace or repair the car over a particular time. This legal assurance in a piece of paper is termed a warranty. Additionally, it is also a guarantee that the car sold to you is not defective and acts as a shield to protect us from unforeseen financial burdens. But, the warranty might not cover the repairs that are caused by any external agents ( such as rash driving or accidents) and the terms vary from manufacturer to manufacturer. There is another term called ‘extended warranty’ that needs to be familiarised before purchasing a car. It’s an add-on warranty that we have to purchase to keep our vehicle under warranty once the standard one expires. The extended warranty does the same work as a standard one except that is for a longer period. 

Coverage 

Coverage of a warranty (also for extended warranty) plan mostly has the options of

  • Cost of the engine and other electrical components inclusive of expensive and imported parts.
  • Labour expense if the cost goes out of hand. 

Exclusions 

  1. Regular Maintenance- Your car requires regular service for an extended lifetime. Regular maintenance can be an engine check, changing the car fluids etc. Most of the warranties do not cover this. 
  2. External agents- Damage to the exterior components of the car due to accidents or calamities cannot claim the manufacturer responsible and hence the warranty does not pay for such damage.
  3. Extras for your car- To enhance our car’s looks we might purchase additional decors that the warranty will not cover.
  4. Changing the structure- Major structural changes are punishable under the law. But minor changes such as changing the paint colour, wheels etc are allowed but the manufacturer cannot pay for them.
  5. Damage caused to wear-and-tear items like brake linings, windshield wiper blades, oil discs, brake pedals, and tyres.

Insurance

In layman's terms, insurance is a cover that protects something (car in case of car insurance) due to external damage such as accidents, natural calamities etc. We pay small amounts as premiums to the insurance company and they in turn cover our damages. Some of us are extremely optimistic and our cars might never face any external damage and insurance becomes irrelevant here. But, in India, as per the Motor Vehicles Act, it is mandatory that all vehicles that operate in any public space must have a motor vehicle insurance cover. Policyholders must have at least ‘third-party liability’ motor insurance coverage even when opting for the basic insurance plans. 

Types of Insurance and their Coverage 

  1. Third-Party Liability Coverage
    Protection from third-party injuries or property damage is provided by third-party insurance. It includes death, property damage, vehicle damage, and bodily injury. Drunken driving collisions are excluded from third-party insurance.
  2. Own Damage Coverage
    This car insurance policy covers the cost of repairs that have occurred to your car. This does not cover the regular service or maintenance costs. 
  3. Personal Accident Cover
    This insurer pays for the medical expenses we incur in case of an accident.
  4. Comprehensive Car Insurance Policy
    It is like a package deal in insurance wherein it covers third-party, non-collision damages, and accident coverages. 
  5. Zero Depreciation Insurance Policy
    The country's car insurance policies come with the option of adding this policy. If your car is damaged and you need to replace some of its parts, the insurer will base the claim settlement on the depreciated value of the damaged parts.

 Exclusions

Regular wear and tear, mechanical or electrical breakdowns, and natural or man-made disasters are not covered by auto insurance. Additionally, it doesn't pay for or cover damaged parts.

Differences in a nutshell

 

Car Insurance

Car Warranty

Third Party Liabilities Coverage

Yes

No

Accidental Damages Coverage

Yes

No

Faulty Parts Replacement

No

Yes

Mandation 

Yes

No

Vehicle Theft Coverage

Yes

No

Mechanical and/or Electrical Failure Coverage

No

Yes

Regular Maintenance or Servicing Coverage

No

No

Natural Calamities Coverage

Yes

No

Car Upgradation

No

No

Time Period

Upto 3 years

Upto 5 years

 Which one is better?

 A car insurance and a warranty serve different purposes for a new or a used better. Both have their pros and limitations. As per the facts and comparison it is best if we have both of them . It is important that we select the right insurance based on our requirements and purposes. The need of an extended warranty is debatable. Happy and fun Learning!

 

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