Does An Extended Warranty Cover Accidental Damage?

by | Feb 12, 2020

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The answer to this question is yes. And no. This is one of those questions that can get people into a lot of trouble – and we want to help you avoid that trouble.

An accidental break down is covered by your extended warranty as long as it’s due to a covered part failing. If the damage is caused to your vehicle by something other than a covered mechanical breakdown, an extended warranty won’t cover it.

That’s what insurance is meant to cover.

A lot of times there’s confusion. An extended warranty isn’t the same as insurance, both from a legal standpoint and from a practical one.

While in many states you’re required by law to have insurance, and extended warranty is seen often as an “extra” even though it can save you thousands, as it did for Doug DeMuro, in perhaps one of the most famous cases of an extended warranty saving someone a boatload of cash.

Let’s explore both of these and examine the differences so you can make a more educated decision on which of the two you need.

Insurance

Insurance is a contract that protects you against risk and the losses associated with that risk. Quite literally what insurance companies do is buy your risk and pool it together with the risk of others in order to spread it out and make your payments more affordable.

In the case of car insurance, insurance protects you against accidents incurred by 3rd parties which include: other drivers, acts of nature like flooding and hail, and from yourself. Of course, you can choose plans that only cover you for specific circumstances, much like you can choose an extended warranty that covers only certain components of your car.

Car insurance plans typically have a deductible, a premium, and a limit of coverage much like an extended warranty does. However, with car insurance, the deductible and the premium tend to have a much higher degree of variance than with an extended warranty.

That’s because the fundamental driving force behind the price of your insurance, risk, can vary greatly depending on who you are. For instance, if you’re a younger driver, you’re going to get charged a higher rate than an older driver, all else equal.

And extended warranty, on the other hand, won’t charge you more for being younger, because the basis for a warranty isn’t for covering risk in the same way insurance does.

The laws governing insurance are different from those governing extended warranties. In fact, in many states (including our home state of Florida) require you to have car insurance.

The key takeaway is that insurance covers you for the risk of something happening. As we’ll see, an extended warranty is a little bit different.

Extended Warranty

An extended warranty is also a contract between you and the obligor (the party responsible for paying your claims) that covers you in the event of a mechanical breakdown caused by defective manufacturing.

The idea behind a car warranty is that you pay a certain amount in, and that amount covers the risk that your car will break down because of the failure of a covered part. This is why warranty prices vary less than insurance – as the pricing models only need to take into account car-related factors, and no other risk factors including the driver, the driver’s location, and past history.

Much like insurance, extended car warranties typically have a deductible, a monthly payment, and a limit of coverage. The deductible tends to vary less than insurance as well – with the highest deductible we know of coming in at $500, with a more typically deductible being somewhere between $0-$100.

Simply put: your price is based on the policy you choose, the type of car you have, and the mileage on it. That’s it. Just like with insurance, there are a number of different plans you can choose from, and each of them covers different parts of your vehicle. The more parts an extended warranty covers, the more it tends to cost.

So Does An Extended Warranty Cover Accidental Damage?

To go back to our original answer, it depends on how you define accidental damage. To kick start this analysis, let’s take a look at this quote ripped right out of one of our extended warranty policies:

“If the VEHICLE has been abused or neglected, or any part of the vehicle has been subject to an accident, physical damage, or adjustments, or for any loss or damage resulting from collision or upset, racing or any other forms of competitive driving, falling missiles or objects, environmental damage including but not limited to fire, lightning, earthquake, windstorm, ice, hail, water, flood, contamination, corrosion, rust, malicious mischief, vandalism, riot or civil commotion, or if the vehicle is a TOTAL LOSS, or has a SALVAGED or BRANDED title. Moreover, if the vehicle has been declared a TOTAL LOSS, or has a SALVAGED or BRANDED title, this shall be grounds for PROTECT MY CAR voiding the customer’s CONTRACT.”

This is one of our contract exclusions – and it’s fairly standard for the entire extended warranty industry.

For instance, here’s the same exclusion from another major player in the extended warranty space:

“For any damage and/or Breakdown resulting from collision, road hazard, fire, theft, vandalism, riot, explosion, lightning, earthquake, freezing, rust or corrosion, windstorm, air leaks, hail, water or flood, acts of God, salt, environmental damage, chemicals, contamination of fluids, fuels, coolants or lubricants.”

 So in this case, if you’re thinking of an accident as someone else hitting your car, or your car otherwise being damaged by an act that isn’t a mechanical breakdown – then no, an extended warranty will not cover accidental damage.

But that doesn’t tell the full story. What about if a covered part breaks down accidentally through no fault of your own?

That is covered.

“WE agree to make the payment to a licensed repair facility for the cost of repairing or replacing the parts covered by YOUR vehicle service CONTRACT and the labor required for the completion of the repair, due to a MECHANICAL BREAKDOWN. At OUR election, the repair or replacement will be made with quality parts including new, remanufactured, exchanged, non-OEM, or serviceable used components.”

So to recap: if your car is damaged in an accident, call your insurance company. If your car breaks down, call your extended warranty company.

Looking For Insurance? What About An Extended Warranty? You Can Get Both With Protect My Car.

The best way to completely protect your car is to have an extended warranty and car insurance. Then you’ll be protected no matter if someone hits your car, or if your transmission decides to fail on its own accord.

Our auto insurance plans can help you save up to 25% or more on your annual insurance premium, while our extended warranty plans are one of the best values on the marketplace because we’re a direct provider and don’t need to sell your contract to a finance company.

With both plans in hand, you’ll be completely covered from accidental damage and you’ll be able to sleep a little bit easier at night.

Now, we know there are a lot of great extended warranty and insurance companies out there, and we’re making it our mission for 2020 to prove to America that we are the best. That’s why, for a limited time, we’ll give you $50 dollars in Protect My Car rewards dollars you can spend at your favorite stores and restaurants just for getting a quote with us today.

So don’t wait. Get a quote right now and start saving thousands on auto repairs and insurance premiums!