Written by: Jen Wagner
Last updated: July 9, 2022
Finding a reliable provider can be confusing when you’re in the market for an extended car warranty. After all, you want to ensure the plan you pick is flexible, affordable, and helpful. But the process of finding what you want might seem even more complex if you’re a California resident.
Due to the state’s strict vehicle service contract laws, drivers can only buy coverage from state-approved providers. Furthermore, how a plan is named depends on the company selling it. But why? To put it simply, California is very particular about what providers call their plans and what they include/exclude in them.
While the laws are meant to protect buyers, they do make finding coverage more difficult. In fact, you can’t technically buy an “extended car warranty” in California. However, you can invest in mechanical breakdown insurance (MBI) or a vehicle service contract (VSC). Both are designed to protect California drivers from unexpected breakdowns. But there are differences between the two.
Opting for Mechanical Breakdown Insurance
Although finding an approved extended coverage provider has its challenges in California, several options are available to ensure your vehicle is protected when a part breaks down. One possibility is buying mechanical breakdown insurance (MBI) after your original factory coverage expires. But unlike conventional car insurance, MBI does not cover damage from a motor vehicle accident. It also doesn’t cover routine maintenance like oil changes, replacement tires or filters, and brake pads. What it does do is shield drivers from the high repair costs of mechanical breakdowns.
MBI is very similar to a vehicle service contract (VSC). However, the California Department of Insurance (CDI) regulates it like regular insurance. Therefore, only CDI licensed businesses can sell it, including banks, credit unions, insurance companies, or other third-party providers. Additionally, MBI rates are standardized in California, so you don’t have to worry about high mark-ups.
As a driver, you can buy MBI anytime, and you don’t have to buy it in person. Purchasing MBI online is possible, with many of the more popular plans coming from:
GEICO
If you’re a GEICO customer, you can add MBI as an optional policy to your current auto insurance plan to cover all mechanical car parts. However, your vehicle must be less than 15 months old and have less than 15,000 miles. Hence, the GEICO MBI is only available for new or leased vehicles.
Anytime you file a claim and GEICO approves it, you will have to pay a $250 deductible. But once you have MBI through GEICO, you can renew your policy for up to seven years or 100,000 miles, whichever comes first. You can also choose your licensed auto repair shop to complete the repairs.
The best way to learn how much MBI from GEICO will cost you is to speak with a representative. Once you buy it, GEICO will include the cost of your coverage in your auto policy, so you don’t have to make separate payments.
Olive
If your car is under 10 years old and has 140,00 miles or fewer, you can get MBI through Olive, which will cover up to 185,000 miles. As a digital-first warranty provider, Olive simplifies the buying process so you can conveniently get a quote, purchase a plan, and track and manage your account online. There is no wait time to get the coverage you need. After you buy MBI with Olive and make your first monthly payment, your plan activates at midnight.
Olive offers three levels of coverage backed by QBE, an international insurer, and three monthly payment options. The plans are:
- Olive Powertrain Plus: This choice includes power steering, front suspension, brakes, and air conditioning components.
- Olive Complete Care: As Olive’s most comprehensive plan, this choice includes nearly everything from the backup assist camera to the transmission control module. It does not, however, cover wear and tear items.
- Olive Powertrain: You can rest assured that your drivetrain’s most expensive parts are protected under this plan. It includes all lubricated transmission and engine parts and costly repairs like water and oil pumps and the thermostat.
The price of the option you pick stays the same throughout the life of your coverage, and you can even choose the deductible fee that works best for you. For more pricing information, you can request a free quote from Olive.
Buying a Vehicle Service Contract (VSC)
Another option to protect yourself from high repair costs in California is through a vehicle service agreement or VSC. VSCs are similar to the extended auto warranties drivers in other states buy, as their purpose is to help cover the cost of future repair bills. But car dealerships must be licensed to sell them in the state, and drivers can only buy them at the time of their vehicle’s purchase.
When you buy a car in California, whether you choose a new or used model, you can add extended vehicle protection to your transaction before leaving the dealership. But unlike MBI policies, VSCs have no pricing restrictions, allowing dealerships to inflate the price of their contracts. Therefore, before you sign a VSC’s dotted line, you need to know what you’re getting exactly and how much you’re paying for it.
Depending on your contract, the terms will include either list of what is covered (i.e., a stated component contract) or what is not (i.e., an exclusionary contract). Also, the contract may require approval from the company that issues it before any work can be done, or it may state where you can go for repair work.
Who pays for the repairs when you file a claim will depend on the type of VSC you buy. One is sold by the dealership representing the licensed Vehicle Service Contract Provider (VSCP). In this case, the VSCP pays for the repairs. The other is a dealer-obligor VSC, which means the dealership handles the claims and pays for the repairs. Regardless, all sellers and administrators must comply with state VSC laws and be licensed.
Weighing Your Options
Even if you’re a California resident who didn’t buy a VSC when closing your car’s sale at the dealership, you still have options. A mechanical breakdown insurance plan can offer more flexibility and affordability than a dealer’s VSC. Take time researching providers and check for any restrictions that may disqualify you for MBI, like your vehicle’s age or mileage.
At the end of the day, what you choose to buy or not buy is your decision. But it is important to remember that not having a solid vehicle protection plan in place exposes you to future out-of-pocket repair costs. So before making your final decision, familiarize yourself with your options and ask about pricing, discounts, and extra benefits. Get the most out of your investment as possible.
