Third Party Car Insurance

Factual Questions
1

Does anyone have experience with this? It seems to be a little like health insurance for cars-- you pay the company a premium, and then if your car need a repair, they cover it in full, or partially.

It is really advantageous over putting the amount of the premium in the bank? I realize that it’s possible a major repair could pop up the month after the factory warranty expires, but it’s not a bad gamble that this doesn’t happen, and at any rate, if you started saving, like $25/month the year before the factory warranty (or the one you bought from the dealer) expires, you could have enough money to could 95% of repairs that you would actually want to cough up the money for. Most "break-the-bank types of repairs would cause you to get a new car.

Unlike people covered by insurance, who are irreplaceable, cars are not.

On the other hand, maybe these companies have other ways of making money besides just collecting premiums.

I have a 2002 Audi, bought dirt cheap a few years ago, in a story that isn’t relevant to thread; I never had a factory, or even dealer warranty on this car, and I did already pay for a catalytic converter, timing belt, and new parking brake cables for it. If I had gotten a reduction on those, it would have been nice, but still, My total output into the car, including all the routine maintenance I’ve done (tires, brakes and such), plus the initial $800 I paid for it 6 years ago (like I said, there’s a story) totals about $3650. Over the 72 months or so I’ve had it, that means I’ve put about $51/month into it. Way cheaper than payments, and the car runs like a dream. Starts every time, handles beautifully, and gets up to speed very, very fast.

Any advice anyone has about car insurance would be appreciated.

2

Not only is putting the premium in the bank to cover repairs probably a better use of your money, you never have to wonder if a repair is covered. Most of these warranty policies will limit the type of repairs they cover, for instance power train coverage is a common limitation. Of the three repairs you did pay for, only the timing belt would likely be covered as a power train repair.

3

I think that’s a fair comparison. But it’s also similar to a service policy on any sort of appliance - refrigerator, water heater, whatever.

All these things (including life insurance) are basically the same, and in all cases you’re usually, in the long run better off with your money in the bank. I stress usually, in the long run, because there is always a gamble involved: If you have a problem sooner, the insurance will pay off big. But if it is a long time before a problem arises, you’re better off with your money in the bank.

4

Yeah.

It was just something we talked about right now, because we are going to be living off capital, and not putting away saving for a while, but I think we would be better off not having something like this, and if we happened to have something happen like a bad pothole that damaged the exhaust or the front end, but we didn’t want to, or couldn’t use saving, to put the repair on a credit card. Even if it took several months to pay the repair off, it would be better to pay the interest, than the pewmiums on a policy.

I suspect people who benefit from these are young people with their first job and first car, that happens to be used, who might want a policy like this for a year or so while they try to establish savings-- or maybe for someone divorced or widowed who got wiped out and is starting over.

I guess that’s kind of what we worry about, though: starting over. We’re taking every precaution we can against having to start over once this pandemic passes, or normalizes, or whatever it does, and we get out of crisis mode.

Our liquid savings are not all we have, but right now, our retirement is in a fund that has outperformed the NASDAQ Q-50 for more than 6 years, but right in this moment, that is meaningless. We also have a piece of property in s. Indiana that was out in the middle of nowhere when we bought it, but the city has been zoning commercial closer and closer every year, and in the last 15 years in has gone from being worth $32,000 to $107,000.

$100,000 was what we were holding out for, and last winter, we made plans to go down, clean it up a little, check and make sure the title is clear, since we really paid it off like, five years ago, but haven’t yet redone the paperwork (there’s no rule about when you have to do it after you pay something off-- you just need a clear title to sell it). So that was what we were going to do during the spring break where I work, which starts next week.

It’s just as well, though, because I’m sure that the real estate market is going to be depressed for a while, and then it will be a buyer’s market. I hate to be morbid, but after a lot of deaths, there will be a lot of people who want to move. A lot of people are going to lose a spouse, and then are going to want to get out of the house they had together. Other people who lost someone are going to want to move to be near family. Then, there will be people who didn’t lose anyone, but either have big medical bills, or loans in forbearance, and are going to sell their houses to move into smaller ones, or cheap apartments, to get a sum of money to get out from arrears.

Now, we are going to be selling to a business or developer, probably, not an individual-- certainly not someone who wants to put up a house. But we’ll still be competing for realtor time (we don’t know enough to go it alone, and we know several realtors personally), and other people are going to be selling to businesses as well.

If we make it through this period without absolutely needing the money, we’ll put it off for at least a year. They’re not going to unzone it, so the value may go down because of the market, but it will probably eventually go back up, and it could even be that someone who is developing will make us an offer.

Last year, they entirely redid the streets around the property-- it looks like a completely different place-- you can tell the county is anticipating much, much more traffic to the area, and I won’t be through-traffic, because there is an exit from the bypass a 1/4 mile north of us for through-traffic. They also redid a lot of the powerlines, and put in water and sewer the next street over last summer, so I have a feeling my street will be getting water and sewer (it’s in a well-water/septic tank area now).

Wow. That really got away from me.

I guess I need a reality check. DH and I have been talking about so many things. We talk something to death, make a decision, or table it until we get a chance to do some more research, and then later, when he’s busy with something else, or not even here, I start thinking “Is it crazy?” I’m not talking, really, to anyone but him. I’m not seeing my friends at shul, my mother, who I used to run stuff by, died the summer of 2017, and my brother is having his own personal crisis.

But starting over was what we talked about early this morning. Suppose, before this is over, we’ve depleted our reserves, plus one of us was sick, and our back-up is eaten up, and we run up a credit card. And we may have a retirement account, but we can’t actually retire on it until the market recovers.

He said, “It’ll be like we’re 25 again.”

Being 25 is OK when you are 25, but not when you are in your 50s

5

The other problem with warrantees like this is that they often require a very specific process to get a repair covered. Like, you have to first call the warrantee company, and then have them set up an estimate with an approved shop, and then fill out some paperwork, and then get an approval confirmation number from them… Better hope you didn’t need to fix your car immediately.

Obviously, from their end, this is done so that people don’t defraud them, but it’s also a convenient way to deny coverage for legit repairs. And of course, expect bad service during this time. They don’t make their money by writing a bunch of checks.

6

I bought a service plan when I bought my first car on my own precisely because if something happened to it I wouldn’t be able to replace it. Buying insurance for things you can replace is generally a bad deal. Buying it for things you can’t replace even though you’ll certainly be wasting money on it is just purchasing peace of mind.

7

I agree that the usual advice (from Consumer Reports, for example) is to forgo extended warranties but instead to save the money in case of an unexpected repair. Plus the car you’re talking about is already eighteen years old; how much money are you prepared to spend on it? And do you have a quote for an extended warranty for it?

8

Duplicate post

9

This!

I had one on a car once. It was a nightmare. Had a clutch go out on a Friday night while I was out of town and the following Monday was a holiday. I either had to get it fixed on Saturday morning or be stuck until Tuesday. Of course the warranty company has bankers hours so nobody to get a hold of. They said they would have paid it had I gotten prior approval! :rolleyes::mad:

Then I had a radiator problem. Took them 4 1/2days to decide if they’d cover it or not. I couldn’t go that long without a car so I just paid it.

Unless it comes directly from the manufacturer extended warranties are a rip off of criminal proportions. Avoid.