What is the Difference between Car Insurance and Car Warranty (New & Used Car)?

Car warranties and car insurance might appear to be similar. A car warranty appears to be similar to a car insurance plan in the sense that your vehicle is covered by both policies. Both policies keep you and your car covered against specific forms of damages. However, there are quite a few differences between the two.

How does Car Insurance Differ from Car Warranty?

Car insurance is available for or any car operating on the road - whether a new or a used vehicle. Generally, car warranties are offered on new cars. Car warranties are generally offered on new vehicles, and can be extended for a period of 3, 5, 7, or even 10 years. The biggest difference between a Car Insurance policy and a Car Warranty policy is the kind of protection extended by each. This can cover car expenses as well as associated costs, although, vastly different things can also be covered by them. Common car insurance policy claims can extend coverage to vehicles from environmental damage, thieves, vandalism, collisions etc.

Typically, a car warranty is intended to pay for specific forms of mechanical breakdowns - such as labor and components costs. An car insurance policy, on the other hand, helps cover the cost of repairing a car after a mishap or covering damage to property or other people harmed by a car - based on the coverage that is chosen.

Things can be slightly confusing here. Car insurance policies and car warranties are of many types. For instance, you can find warranties for new cars and extended warranty for old cars. Mechanical breakdown warranty cover are also available.

That being said, car insurance policies and warranties cover two things that are vastly different. Warranties generally cover manufacturer’s defects and breakdowns on a vehicle, although these exclude the wear and tear. On the other hand, car insurance policies cover the costs of damages caused to other people or others’ properties only at the most basic level. At a comprehensive level, it covers all vehicle damage.

To put it simply, a car insurance and auto warranty are different from each other in the sense that a vehicle is covered by a car warranty policy for only a specific time period. Car insurance policies, on the other hand, cover the car, the passengers and the driver for as long as car insurance premiums are paid by the policyholder – such as the car owner or driver.

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