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Car Warranty vs Insurance: Which is Better?

Explains car warranty and insurance differences, covering repair costs, accidental damages, and financial protection. Highlights the importance of both for comprehensive coverage and offers tips on selecting the right insurance policy.

  • 03 Feb 2025
  • 6 min read
  • 173 views

When it comes to safeguarding your interests on the road, there are two important things to take into consideration car warranty vs. car insurance. Though both come with their own set of advantages and disadvantages it is crucial to understand the ins and outs of both, before availing them.

In this blog, we will understand what a car warranty is and its types. Then we will look at the difference between warranty and insurance, helping you choose between the two. Further, we will look at some tips to help you choose the right car insurance policy. By the end of the discussion, you will have a clear understanding of how these two components combine to give you a sense of security and safety while driving the vehicle.

What is a Car Warranty?

A car warranty refers to the commitment by the vehicle manufacturer, to ensure potential replacement or repair of the car if necessary. It acts as a safety cover from the car’s financial setbacks that could be caused because of defects in the car.

A car warranty is basically an assurance that the vehicle will remain free from damages and defects for a specific time period. But, in case any defects or problems arise in this period, the manufacturer will replace or repair the parts usually free of cost.

In short, it is a manufacturer’s promise that the vehicle will function as intended and any defects will be worked out without adding burden to the owner’s pocket as the warranty is still in effect. Car warranties generally cover repair costs for including repair costs the engine, gearbox, electrical, and other mechanical parts but do not guarantee normal wear and tear.

Types of Car Warranty

Given below are the different types of car warranties -

Standard warranty

A standard warranty also known as a new car warranty is acquired at the time of purchasing a new car. The majority of the manufacturers provide warranties for 3 to 5 years on the basis of kilometres.

A standard warranty is a type of coverage that comes with most purchases. It is an assurance from the manufacturer that the product will perform efficiently for a specified duration. In case any issues come up during the specified period they will be covered in the warranty without charging any additional costs from you. However, a warranty only covers faults and problems that arise due to manufacturing errors or defects, rather than covering the damage caused due to any accident or external factors. These warranties usually cover the machinal and electrical parts of the vehicle.

Extended warranty

The standard warranty comes with a time period limit. What when this time period expires? Extended warranty is the answer.

Extended warranty as the name suggests is the one that you purchase after the existing warranty has expired. They are different from actual warranties in the sense that they might not give you the same coverage options as the new warranties. These types of warranties are usually purchased from manufacturers, dealers, and third-party entities.

In some cases, an extended warranty can be purchased before the standard warranty expires, but some manufacturers have a certain time limit to purchase an extended warranty. The coverage of an extended warranty generally depends on the car model and the manufacturer in question. Extended warranty generally provides protection for the engine and any type of electrical damage. But wear and tear losses are excluded.

Car Warranty or Car Insurance: Which Should You Choose?

When exploring the options related to your vehicle safety there are two important things that come into play car warranty vs. car insurance. Though both serve different purposes. It is extremely important to understand the difference between warranty and insurance.

A car warranty is referred to as a manufacturer’s assurance of the quality and reliability of the product. It is actually a guarantee to the buyer that if parts of the car become defective or you face issues with your car will be repaired or replaced free of cost during this specific period. A car warranty extends to components like engines, electrical parts, gears, etc. A car warranty protects the vehicle from unexpected mechanical defects, without putting the burden of additional finances on the pockets of the buyer.

On the other hand, car insurance is an instrument of financial protection that protects your car in cases of damage to the vehicle during an accident etc.. Not only this, insurance includes damage caused because of fires, natural calamities, accidents, floods, riots, vandalism, etc. If you don’t have insurance then you will have to incur all the expenses yourself.

While both car warranty and car insurance are different concepts, it is important to have both because both provide protection against unforeseen damages and losses. You should really not be choosing between the two.  In short car warranty provides financial protection in case of defects in the parts or technical faults, and car insurance provides financial protection in case of accidents. Together, both serve as a safety net that protects you and your investment in the form of a car on the road.  

Also read:

How to Choose the Right Car Insurance Policy?

Having understood the car warranty vs. insurance aspect, let us now consider some tips for choosing the right car insurance policy.

Insurance companies in India offer a number of insurance plans to potential buyers. In order to choose the insurance plan, correct meticulous research is required. The first thing that you need to do is have a good idea about your needs and the type of policy you want.

Indian insurance policies can be classified into two types, Third party Insurance, and Comprehensive Insurance. Third-party insurance is a must as per law and covers the liability towards third parties only. A comprehensive insurance policy covers both the third-party liability and damages incurred to your car in case of an accident.

While deciding which insurance to avail it is important to compare the different plans and get an idea about what the policy includes and excludes, the type of add-ons offered, the claim process, deductibles, etc. It is always wise to choose a plan that is cost-effective for the premium paid and also gives you the desired level of protection.

Frequently Asked Questions

Is it worth buying an extended warranty for a used car?

There are a number of factors that should be kept in mind before purchasing an extended warranty for used cars.

When it comes to buying a warranty for a used car, it is to be kept in mind that the car might not be covered under the manufacturer’s warranty and may require repair frequently. It is always advisable to get your vehicle accessed to know about the repair history and then go ahead with an extended warranty that covers your car’s previous issues.

Car warranties help in lowering costs associated with repairs brought on by parts that have reached the end of their useful lives. Therefore, the extended warranty will aid in reducing costs associated with replacement parts.

Before you decide to purchase an extended warranty for your vehicle you should first examine the costs associated with it, the risk that you can tolerate, your financial status, and lastly how reliable your vehicle is.

Is a car warranty the same as insurance?

No, car warranty is not the same as car insurance. Both intend to provide financial assistance in case of damages but vary significantly. Car warranties are associated with covering costs associated with faults and defects in the parts of the car like gears, engine, steering wheel, etc., whereas on the other hand, insurance is related to damages caused due to man-made accidents, natural calamities, fires, thefts, and many more.

Though both of them are related to the safety of the vehicle and cater to specific aspects of protection they are very different. In this blog, we have thoroughly delved into the car warranty vs. car insurance aspect. Understanding the differences will make you better equipped to prioritise and buy the one that is more urgent.

 


Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the Insurance industry and products. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.  

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