Motor Insurance

Difference Between Car Insurance And Car Warranty

Difference Between Car Insurance And Car Warranty

Akshay’s car has stopped working because water entered his car engine while driving home through a water-logged area. The next day, he calls up his car dealer to repair the car and claim it under the warranty. The dealer informs him that such damages cannot be claimed under warranty, because a warranty can only be claimed for manufacturing defects in the car. Before Akshay loses his mind, the dealer informs him about his car being covered under a special add-on called Engine Protector. The Engine Protector covers the car from damages that are caused due to damage to the engine due to an accident, including water entering the car during floods.

Complicated?

Not really. We will explain.

First, you have the basic Car Warranty that your car comes with. How does it work? Let’s find out!
 

What is a Car Warranty

It is a warranty provided to you by your car manufacturer, with an assurance that they will repair or replace any parts with any manufacturing defect in your vehicle. The manufacturer issues it to you with a promise that the car, once it drives off from the showroom, will not face any defect for a specified period of time. And if in case it does, the manufacturer will repair or replace the parts free of cost.

A car warranty will cover the mechanical and electrical parts of your car. It will ensure the proper functioning of the car during its term period. However, please note that any damages arising out of negligence on your part, any road accidents or wear and tear, will not be taken care by the manufacturer.
 

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Types of Car Warranty

It is mainly of two types -

  • New Warranty
    A New Warranty can be purchased for your new car. It usually ranges from 3 to 5 years.

  • Extended Warranty
    Extended Warranty, also known as an Aftermarket Warranty, can be purchased once the new warranty expires.

For instance, Prachi bought a high-end car. After its New Warranty period expires, she should consider getting an Extended Warranty to continue the coverage. If she wants to financially cover herself from any major malfunction in the car, an Extended Warranty will save the day. For instance, a car warranty will cover the entire brake system. If, say, the brake system stops functioning or malfunctions, she may have to pay around Rs. 50K to 1 Lakh from her pocket, if she doesn’t have an extended warranty.

Coverage plans may vary across car models and manufacturing companies.
 

Benefits of a Car Warranty

  • A Car Warranty is mostly provided by the manufacturer, without any extra cost, except of course Extended Warranty.
  • Unlike an insurance policy, a warranty is not mandatory.
  • Once the original warranty provided by the manufacturer expires, you have the choice to extend the protection by purchasing an extended warranty.
  • Any internal malfunctioning of the vehicle will be covered by the warranty, without you having to pay for it.
     

What Does A Car Warranty Not Cover?

  • A Car warranty will cover the manufacturing defects, but not the ones caused due to an accident.
  • Any repairs to the tyre, brake, or windshield wipers will not be covered.
  • No wear and tears, or damages arising out of negligence will be taken care of.
  • A car warranty will also not cover any third-party defects or liabilities.
  • Car warranty will not provide any coverage in case of a vehicle theft.

Now that we are aware of the intricacies of a Car Warranty, let’s move on to Car Insurance and see how it is different.
 

So, What is Car Insurance?

It is an agreement between you and the insurance company. It gives you financial protection against any damages caused to your car and a third party, in exchange for a premium amount that you have to pay to the insurer. Third-party insurance is mandatory as per the law while own-damage is optional.
 

Types of Car Insurance Policy

Car insurance can be categorised into the following types -

  • Liability Only/Third-Party Insurance
    This is the most basic vehicle insurance and a statutory requirement. Without this policy, it is illegal to drive your car in India. This policy covers any injury/losses caused to a third party individual or their property by your insured vehicle.

  • Standalone Own-Damage Policy
    This covers the damages caused to your own car due to accident/theft. Any damages caused to the third party or their property will not be covered by this policy.

  • Comprehensive Policy
    As the name suggests, it gives you complete, enhanced insurance coverage. This type of insurance policy covers the third-party liability as well as the damages caused to your own vehicle. The best of both worlds!
     

Benefits of Car Insurance

  • It financially protects you and your car in case of accidents and theft.
  • Damages caused to the third party or their property is also covered.
  • It gives you the option to choose add-ons/riders like Roadside Assistance, Engine Protector, Accessories Cover, among others, for a wider coverage.
     

What Does Car Insurance Not Cover?

  • It will not cover any damages caused to the vehicle due to any manufacturing defects or wear and tear.
  • It will not protect you against losses that are not related to accidents, collisions, or theft.
     

Comprehensive Car Insurance vs Car Warranty - A Comparison

Parameters Comprehensive Car Insurance Car Warranty/Extended Warranty
Definition This is a contract between the insurance company and you. The insurance company covers losses against any damages to your car and the third-party. You need to pay a specific premium. A car warranty is provided by the manufacturer. It covers any manufacturing (mechanical/technical) defects that the car faces during a specified period of time.
Damage coverage This covers accidental damages or theft caused to your own car, as well as third-party legal and financial liabilities. This provides coverage against car malfunctions happening without the fault of the car owner or others. This does not cover accidental coverage’s, and wear and tear.
Engine malfunction due to water entering the car Such loss is not covered by default. It can however be covered through an add-on called Engine Protector. Is not covered, because the repair or replacement required is not because of a manufacturing defect.
Is it mandatory? It is mandatory to have Third-Party insurance to drive your car in public areas. This is not mandatory
Customisation It can be customised by adding certain add-ons to extend the coverage. It cannot be customised.
Coverage for the owner of the car Personal Accident Cover for the owner-driver, passengers, and paid driver can be added to a policy. It does not provide any coverage to the owner-driver or passengers.

 

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To Put Things Into Perspective, Consider The Following Examples -

Car Insurance Car Warranty
Suppose, a car hits the back of your car - causing a rear-end collision. It results in frame damage, and the car loses its structural integrity. A Car Insurance Policy will help you pay for such repairs and replacements. Suppose, your car refuses to switch gears and breaks down due to a problem in the transmission system. This is an internal malfunction. An active Car Warranty will financially protect you against it.

So as you can see, to be on the safer side, it is wise to have both of them in place. The coverages of Car insurance and a Car Warranty do not overlap, and one cannot be ignored in favour of the other. Learn your options thoroughly, and enjoy the road journey, without worrying about the potholes.

 

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