I've seen quite a few ads lately for car repair insurance. They sounded like a waste of money. They seem even more so after reading this article in Forbes.
Our '99 Forerunner has over 345,000 miles ... as far as that insurance , you'd be better off putting that money in savings to pay for repairs .
In general, you should only insure against losses you cannot afford to bear. Because part of your ilnsurance premium goes to bookkeeping and profit for the insurance company. If you self-insure, there is no bookkeeping and you keep the profit.
For most people, if their house burnt down, they couldn't afford to buy another. So you should have fire insurance. If someone broke his leg on your property and it was your negligence, you probably oculdn't afford to pay for that.
And for most people with children, if one parent died, they couldn't afford to fully raise the children. And in a traditional arrangement, if the husband dies, before 65, his widow won't have enough money to live on. So those people need life insurance.
And I guess if you don't have enough money in the bank to pay for your funeral.... well, I can afford that. (I'm getting a cheap one.)
But if you can afford a new transmission, or new engine, or just buy another car, you don't need to insure for those things. Be a self-insurer and keep the profit.
I used to think that if you insured a package that you're mailing, the post office would take better care of it, and that was worth more than being paid to replace it after it was lost. But I've gotten the impression they don't treat insured packages any better.
As with any insurance the insurance company is in business to make money. We buy insurance to avoid catastrophic costs but a car repair may be high, like an engine or transmission replacement but these are not catastrophic and you should be able to afford them.
Offhand, I once checked and saw policies cost maybe $125/month. That adds up and in the long run if you do not need a big repair you lose.
One thing I've wondered about is some of the ads on TV say that you can take your car to your own mechanic or the dealer. But do most mechanics and especially dealers accept there insurance plans and do the work for whatever they will pay? Dealers are the most expensive, do most participate and do the work for whatever the warranty company will pay?
Most dealers also sell plans so they do at least accept from that company.
On the car forum I participate, a few people said it was good when they had a big problem. Seems to be a minority though.
In most cases you would be better off putting your money in beer - drinking all the beer and cashing in the empties. You would be farther ahead than buying just about any third party used car "guarantee" or "repair insurance"
I had to take a quick look after you mentioned the $125/month. CarShilds' cheapest rate is just under $100/month. That's crazy.
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