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Car warranty vs insurance. Which is better?

Team AckoApr 30, 2024

Whether your car is old or new, you should insure your vehicle with a comprehensive insurance plan to cushion yourself against accidental damages and car warranties in case of faulty motor parts. In terms of financial security, both offer the comfort of financial protection. But, how different are they? In this article, you will learn about the difference between car warranty and insurance along with their benefits.

Contents

What is a car warranty, and what does it cover?
- What is car insurance?
Car warranty types
- New warranty
- Extended warranty
Car warranty: Pros and cons
- Car warranty pros
- Car warranty cons
Conclusion
Frequently Asked Questions

What is a car warranty, and what does it cover?

A car warranty is an assurance by the vehicle manufacturer promising to replace or repair your vehicle if necessary. A warranty is a promise by the manufacturer and is mainly used as a shield against sudden or unforeseen financial loss caused by a defect in the car.

When the manufacturer issues a warranty, the manufacturer guarantees that the vehicle will be free from defects during a specific period. However, if any defect or problem arises during the specified period, the manufacturer will replace or repair the parts usually without any additional costs.

The terms and conditions of the warranty do not apply to any kind of failure due to regular wear and tear of parts of the vehicle. Also, labour charges for replacing or repairing the faulty parts are included in the warranty unless stated.

Basically, anytime your vehicle breaks down or malfunctions on its own without your fault or by others, then a car warranty will cover you and your car.

Car warranties usually cover the mechanical and electrical parts of your car. For example, car warranties can be for safety equipment such as airbags, seat belts, etc., or they can be for the engine or the gearbox.

What is car insurance?

Motor insurance is an agreement between you and ACKO (insurance company), in which you pay a premium in exchange for financial protection against damages to your car and third-party liabilities. While the Third-party Insurance Plan is mandatory, the Own Damage (OD) insurance is optional. Both these plans are bundled and offered as Comprehensive Car Insurance Policy.

At ACKO, you get to buy, renew or submit claims against your Car Insurance Plan through the online platform. Since there are no agents and digital infrastructure, the operational costs are lower. Hence, ACKO can devise low-cost insurance plans along with a hassle-free experience.

Coverages	Car Insurance	Car Warranty
Third-party liabilities	It covers third-party injury or death or damages to their property.	It does not cover third-party liabilities.
Damages to the insured vehicle	It covers accidental damages to the insured car.	It does not cover accidental damages to the insured car.
Faulty parts	Do not cover or pay for defective parts.	It does cover faulty parts and gets it replaced.
Is it mandatory?	While the Third-party Car Insurance Plan is mandatory, the Own Damage insurance is optional.	New warranties for new vehicles are part of the purchase of the car. However, extended warranties are optional.
Personal Accident (PA) cover	The mandatory PA cover needs to be purchased separately.	Does not have the option to buy a PA cover.
Vehicle theft	It covers vehicle theft.	It does not provide coverage for vehicle theft.
Total loss (damaged beyond repair)	It covers total loss.	It does not cover total loss.
Regular wear and tear	Does not cover.	Does not cover.
Mechanical/electrical failure	Does not cover.	It covers mechanical/electrical failure within the specified period.
Natural/man-made calamities (floods, cyclones, riots, vandalism, etc.)	Does cover natural or man-made calamities.	Does not cover natural or man-made calamities.
Fire/explosion	Yes, it covers.	It does not cover.

As you can understand from the above table, both provide financial protection against unforeseen damages or losses. However, there is a fine line that separates them. While car insurance provides coverage against accidental damages or losses, car warranties provide coverage against faulty parts.

You may have to choose both since it offers peace of mind knowing that insurance will take care of accidental damages while warranties will take care of faulty parts.

Car warranty types

Here are the two types of warranty for vehicles.

New warranty

You can buy it during the purchase of your new car. Most of the manufacturers provide warranties for 3 to 5 years or based on the kilometers.

Extended warranty

Once the new warranty expires, you have the option to buy an extended warranty. Coverage plans under the extended warranty may not be the same as new warranties.

Car warranty: Pros and cons

Here are the advantages and disadvantages of car warranties.

Car warranty pros

No worries about faulty parts
Optional extended warranty
Not mandatory
New warranties are usually provided without any costs

Car warranty cons

It does not cover all types of repairs such as tyres, brake pads, windshield wipers.
It does not cover accidental damages to the vehicle
No option to include car insurance add-ons
No option to include Personal Accident (PA) cover
It does not cover third-party liabilities

Conclusion

The car warranty and car insurance are significantly different forms of financial protection and aimed at protecting you and your car in different ways. For example, in case of a car breakdown due to faulty parts, the car warranty provides coverage, and if your vehicle meets with an accident, the car insurance provides coverage.

Hence, it is wise to have both to be on the safer side and be at peace knowing you are financially protected against damages to your vehicle and repairs of faulty parts.

Frequently Asked Questions

Here are some of the commonly asked questions about car warranties and car insurance.

FAQs

Is a car warranty the same as insurance?

While both provide financial protection against unforeseen liabilities and may overlap at times, they are very different from each other. For example, motor insurance provides coverage against damages due to an accident, man-made or natural calamities, fire/explosion, or losses due to vehicle theft or total loss. As for car warranties, it provides coverage against faulty parts of the vehicle.

Are car warranties worth it?

Car warranties are worth it, especially in case of component failure or a breakdown due to an issue with the parts.

Is it worth buying an extended warranty for a used car?

It depends on the condition and age of the car. However, car warranties help reduce expenses arising from repairs caused by parts that are at the end of their operational life. Hence, the extended warranty will help cut unnecessary costs due to replacement parts.

Do you need car insurance and a car warranty?

Both car insurance and car warranty are financial backups. While car insurance provides financial protection in case of accidental damages, the car warranty provides financial protection in case of faulty parts. Hence, both are important since they provide financial protection for different types of liabilities.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.