What’s the Difference Between a Car Warranty and Car Insurance?

Quick Answer

Both car insurance and a car warranty can help reduce your out-of-pocket expenses for vehicle repairs, but they cover different things. Auto insurance helps pay for accident-related injuries and repairs, and warranties pay for mechanical repairs.

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Both car insurance and car warranties may cover vehicle repair costs, but they offer different types of protection. The coverage that applies depends on the kind of repair you need. Read on to learn more about the differences between the two, including how they work, when they apply and what may be excluded from each type of coverage.

What Is Car Insurance?

Nearly all states require drivers to purchase car insurance to satisfy their financial responsibility requirements to other drivers if they cause an accident. You can buy coverage directly from an insurance company or through an agent. Depending on the types of coverage you have, your policy may help pay for injuries, vehicle repairs and your legal liability after an accident.

The average cost of auto insurance is $147 per month, or $1,759 per year, according to The Zebra. However, the cost of auto insurance can vary dramatically based on the types of coverage you purchase, the policy limits you choose, your driving record, where you live and other factors.

A standard auto insurance policy often includes six main types of coverage. However, you may choose to include additional coverage options for greater protection.


Liability coverage pays for injuries and property damage you cause to someone else after an at-fault accident. It doesn't cover your medical bills or pay for repairs to your vehicle. It's required by law in almost every state.

Uninsured/Underinsured Motorist (UI/UIM)

Not all drivers maintain insurance coverage even though the law requires it. Uninsured/underinsured motorist coverage protects you if you get hit by a driver who doesn't have insurance or whose policy limits are too low to cover the damage they cause. Some states require this type of coverage, and it's optional in others.

Medical Payments (MedPay) / Personal Injury Protection (PIP)

Medical payments and personal injury protection can help pay for injuries you and your passengers sustain during an accident, no matter who is at fault. If you're unable to resume your normal activities due to a crash, PIP may also cover additional expenses, such as child care or lost wages. Some states require these coverages, and others offer them as an optional add-on.


Collision coverage helps pay for repairs to your vehicle caused by a crash, vehicle rollover or pothole. No states require drivers to maintain collision coverage, but lenders typically do if you have an auto loan or lease.


Comprehensive coverage pays for damage from incidents unrelated to a crash, such as severe weather or vandalism. It's optional in all states, but like collision, lenders and leasing companies usually require it if you have an auto loan or lease.

What Is a Car Warranty?

A car warranty helps pay for repairs to your vehicle related to a mechanical failure or defect, not an accident. In general, there are two types of warranties: the manufacturer's warranty and extended warranties.

Manufacturer's Warranty

A manufacturer's warranty comes with the purchase of a new vehicle. Used vehicles may or may not have a manufacturer's warranty, so be sure to check before you buy. A manufacturer's warranty typically has at least two components: bumper-to-bumper and powertrain. The bumper-to-bumper component covers most repairs except those related to normal wear and tear, and the powertrain warranty covers repairs for parts in the powertrain system, such as the engine and transmission.

Manufacturer's warranties are good for a specific number of years or miles, and the bumper-to-bumper warranty typically expires before the powertrain. Warranty lengths vary, but it's common for manufacturers to offer bumper-to-bumper warranties for three years or 36,000 miles and powertrain warranties for five years or 60,000 miles.

When the manufacturer's warranty expires, you have the option to purchase an extended warranty to cover future repairs.

Extended Warranty

Unlike a manufacturer's warranty, extended warranties aren't included in the purchase of a vehicle, but you can buy an extended warranty at any time. Extended warranties are available from dealerships or third-party vendors and typically kick in when the manufacturer's warranty expires. Depending on when you purchase the plan, both warranties may be active simultaneously.

To receive payment for repairs, you generally need to file a claim with the warranty company. Some plans have deductibles you must pay before receiving payment for covered services and restrictions on where you can take your car for repairs. Cost, covered services and warranty length can vary significantly by provider, so be sure you understand how the plan works and compare multiple quotes before purchasing one.

How Do Car Warranties and Car Insurance Compare?

Insurance and warranties cover different services, and one can't be used in place of the other. Here's a quick look at how they stack up.

Car Warranty vs. Car Insurance
Car Insurance Car Warranty
Required by law Yes, in most states No
Covers physical damage caused by an accident or other covered event such as severe weather Yes No
Covers your legal liability to other drivers Yes No
Covers routine maintenance No No
Covers mechanical issues No Yes
Age and mileage restrictions No Yes
Deductible required Typically Sometimes

The Bottom Line

If you own a car or plan to buy one, insurance and warranties can help protect you from expensive repair bills, but warranties and car insurance differ in the coverage they provide.

Extended warranties are appealing to some, but it's a good idea to weigh the cost of an extended warranty against the cost of potential repairs and consider the likelihood you'll use it to help you decide if buying one makes financial sense.

If you're considering updating your insurance policy to save money or for an additional level of coverage, be sure to compare multiple quotes from different providers to find one that fits your needs. Experian's car insurance comparison tool can help you find coverage that meets your needs and fits your budget.