What are the coverage differences between a car warranty and auto insurance?

The biggest difference between a car warranty and insurance coverage is that a warranty will cover only your vehicle for only a certain amount of time while auto insurance policies cover the vehicle, the driver, and their passengers, as long as you pay your auto insurance premiums.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Apr 24, 2022

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Car warranties and car insurance might sound similar. However, there are crucial differences between car insurance vs. warranty coverage. Today, we’re explaining the specific coverage differences between vehicle warranties and vehicle insurance plans.

What is car insurance?

Car insurance is a policy that protects you from the risk of financial loss associated with your automobile, including damages to the vehicle, damages caused to other property, and damaged caused by an external source.

Common car insurance policy claims involve collisions, vandalism, stolen vehicles, or environmental damage – like vehicle damage caused by a hailstorm or windstorm.

Not all car insurance policies, however, cover all events. At the most basic level, car insurance covers damage your car might cause to someone else’s property. In fact, this is the most basic legal requirement behind vehicle insurance: you have to maintain a certain amount of liability coverage to legally drive on most roads.

Basically, car insurance is a policy that covers costs associated with your vehicle. You pay a monthly fee to an insurance company. If you’re involved in a collision, or if you damage someone’s property, then you can make an insurance claim and have your insurance company pay for any damages.

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What is a car warranty?

A car warranty is similar to an insurance plan in that both policies cover your vehicle. Both policies protect you and your vehicle against certain types of damages.

Car warranties are typically provided on new vehicles. You might purchase a brand new vehicle, for example, and receive a 3, 5, 7, or even 10 year warranty. Warranties also typically have a certain mileage limit. The warranty will expire after 10 years or 50,000 miles, for example.

Certain used cars – like certified pre-owned vehicles offered by some dealerships – may also come with limited warranties.

In any case, a warranty covers certain vehicle damages. If you bought a brand new vehicle and your engine or transmission fails after 2 months and 20,000 miles, for example, then your car is likely covered under your warranty policy.

A car warranty is a manufacturer’s way of guaranteeing quality and trust in a vehicle. The manufacturer is essentially “betting” that their car won’t fail before a certain number of years or miles have passed. If your car does fail during this period, then you’re eligible for compensation.

What a warranty doesn’t cover is any damage to another party. This is one of several major differences in coverage between a car warranty and a car insurance policy.

The Difference Between a Car Warranty and Car Insurance

The biggest difference between car warranties and insurance is the type of protection offered by each. They can both cover your vehicle and associated expenses – but they cover vastly different things.

In general, a warranty is designed to pay for certain types of mechanical breakdowns, including parts and labor costs, while car insurance, depending on the coverage you choose, helps repair your vehicle after an incident or cover damage to other persons or property harmed by your vehicle.

Here’s where things get a little confusing. There are multiple types of warranties and multiple types of insurance policies. There are new car warranties, for example, and extended warranties. There are also mechanical breakdown insurance policies.

What does a car warranty cover?

There are two different kinds of warranties and they offer different kinds of coverage.

New Car Warranties: New car warranties are essentially a promise – from the car’s manufacturer – to help pay for replacement parts or covered repairs during your specified warranty period. This warranty is automatically included with the purchase of a new car. A basic new car warranty will cover 3 years or 36,000 miles. A good new car warranty will cover 10 years or 100,000 miles. The exact warranty coverage will vary from company to company, so it’s important to read your warranty documents carefully. Some warranties are considered “bumper to bumper” policies because they cover everything from your engine to your air conditioning system to your brakes. Other warranties are more basic. Even on bumper to bumper warranties, however, you won’t get coverage for basic “wear and tear” due to regular use of your vehicle, including tire and brake pad wearing. You’ll also find specific mentions of “power train warranties”. A power train warranty covers your car’s engine and transmission.

Extended Warranty: Car dealerships and manufacturers will often offer extended warranties. You can purchase an extended warranty to extend the length of your new warranty or to cover a used car. These warranties may be offered either by the car’s manufacturer or by an outside company. Extended warranties will not typically cover general “wear and tear” on your vehicle, including wearing on wiper blades, tiers, and brake pads. These extended warranties may also require you to pay a deductible before the warranty begins paying out for repairs.

What won’t a warranty cover?

So your car has a warranty. That doesn’t mean you can take your car off-roading or ignore regular maintenance. A car warranty is not a license to stop taking care of your vehicle.

Warranties typically won’t pay for routine maintenance – like oil changes and fluid top-offs. They also won’t cover general wear and tear on your vehicle.

What does car insurance cover?

Car insurance covers different things depending on the type of insurance you have. Popular types of car insurance include:

  • Liability Coverage. This is the most basic level of coverage. It helps pay for someone else’s property damage or medical bills created by an accident where you’re at fault.
  • Collision Coverage. This insurance may help pay to repair or replace your car if it’s damaged in a collision.
  • Comprehensive Coverage. This insurance covers more types of vehicle damage, including collisions, fires, thefts, vandalism, hitting an animal, storm damage, falling objects, and more.
  • Mechanical Breakdown Insurance. Mechanical breakdown insurance, or MBI, is typically only available on newer vehicles. It covers many of the same things as car warranties – including general breakdowns and other car troubles.


Ultimately, car warranties and car insurance policies cover two vastly different things. In general, warranties cover breakdowns and manufacturers’ defects on your vehicle – but not wear and tear.

Insurance policies, on the other hand, cover damage caused to other property or people (at the most basic level) and all vehicle damage (at the comprehensive level).

It’s a good idea to keep the differences between a warranty vs. insurance in mind when you’re shopping for auto insurance so you know what types of coverage to buy. If your warranty won’t cover something, there is likely an auto insurance coverage option that will give you what you need.

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