Differences Between Car Insurance and Warranty

Posted on: Mar 27, 2023 | 3 mins | Written by: HDFC ERGO Team

Differences Between Car Insurance and Warranty

While buying a new car, owners must make themselves familiar with a few terms and jargon. These terms will make you aware of the different things that dealers and other car owners talk about. Also, it makes way for better car ownership. Car insurance policy and car warranty are two such common terms that you should know. And they can be a bit confusing at first.

What does a car warranty mean?

On buying a new car, a car owner receives a standard warranty for the car. It is a simple agreement that states that the car manufacturer will repair the car or replace certain parts of the car without you having to pay anything for it. These parts will be replaced or repaired if they fail prematurely. In most cases, a manufacturing defect is one of the leading causes.

Car manufacturers usually offer a warranty for a specific period or the number of kilometres travelled. Whichever of the two occurs earlier will be the end of the warranty. The duration of the warranty could look like 3 years or 1 lakh kilometres. In simple words, the manufacturer ensures that you need not worry about the car for 1 lakh kilometres or up to 3 years of its ownership. If there is any defect in the car during this period, the manufacturer will repair or replace parts as necessary.

However, it is important to note that the warranty does not apply to all failures. Standard failure due to wear and tear is one of the best examples. For example, if you have used your car excessively and its brakes are torn, it might not be covered as a part of the warranty. However, if the brakes wear out in a very short span of time, it might be due to a manufacturing defect, thus coming under the warranty.

Also, you are not required to pay any labour charges for the repair or replacement of parts. Simply put, if the vehicle breaks down on its own within the warranty period, the manufacturer will look into the issue under warranty. The warranty is usually for the electrical and mechanical parts of the car. It applies to equipment such as airbags, seat belts, etc., the engine, transmission, air-conditioning, sensors, infotainment system, etc.

What is car insurance?

A car insurance policy, on the other hand, is an agreement between you and the insurance provider. While you pay a premium for a predetermined duration, the insurance provider will offer financial coverage for your car. The policy will pay for any damages to your car, injuries, or damages to other vehicles, thereby saving you from a financial mess.

You can choose from different types of car insurance policies. The most popular ones are third party insurance and comprehensive insurance. Third party insurance policies are a requirement by the law and protect you and your car if an accident involves any other individuals or vehicles. It is the most affordable policy. However, it does not cover damage to your car. This is where comprehensive insurance thrives. It protects your car from third party liabilities as well as damages to your car.

Car warranty types

Before we get to the difference between warranty and insurance, knowing the different types of car warranties can be quite useful. Here are the two types of warranties for cars.

Warranty for a new car

This is a standard warranty that comes with most cars. When you buy a new car, depending on the car model and its presence in the market, the manufacturer offers different warranties. Standard car warranties are available for 3 to 5 years, along with a limit on the total number of kilometres.

Extended warranty for a car

As the name suggests, you can opt for an extended warranty for your car. For this, you might have to pay an additional amount. It essentially increases the warranty duration of your car and offers complete peace of mind for owners. For example, if your car comes with a standard 3-year warranty, you can pay an additional amount and extend the warranty for 2 more years. However, the coverage available on an extended warranty might not be exactly the same as a standard warranty.

Car warranty: Advantages and disadvantages

Here are some of the advantages and disadvantages of a car warranty.

Advantages

● The manufacturer takes care of any faulty parts of the car

● Warranty for a new car usually does not cost anything

● You have the option of extending the warranty

Disadvantages

● It does not cover damages due to accidents

● It does not cover third party liabilities

● It does not cover repairs to wipers, brake pads, tyres, etc.

● It does not offer coverage for personal accidents

What is the difference between insurance and a warranty?

Here are some differences that will help you understand car warranty vs insurance in a much better way.

1. Coverage

A warranty does not cover any sort of liabilities, but insurance does. It offers coverage for third party injuries, accidents, and even death.

2. Issues with parts

A warranty covers any issues with parts of the car, while insurance does not cover such grounds.

3. Mechanical or electrical failure

A warranty covers issues such as mechanical or electrical failure, whereas insurance does not provide such coverage.

4. Damages to the car

A warranty does not cover any damages to your car or someone else’s car, but insurance does provide protection for your car.

5. Theft of car

A warranty does not cover the theft of the car, but insurance covers the theft of a car.

6. Mandated by law

A warranty is not mandated by the law but is available with a new car. You can choose to extend your warranty. However, insurance is mandated by the Motor Vehicles Act.

7. Wear and tear

Neither warranty nor insurance covers damages due to wear and tear of the car.

8. Natural calamities

A warranty does not cover damages due to natural calamities, but insurance covers damages due to natural calamities.

9. Total loss

A warranty does not cover the total loss of the vehicle due to accident or theft, but insurance covers such damages.

10. Personal accident cover

A warranty does not have any such options, but you can choose a personal accident cover along with your car insurance policy.

Conclusion

Though insurance and warranty might seem a bit confusing at first, they are quite different. A car insurance policy intends to keep you and your financials safe in the event of an accident and covers a lot of ground. On the other hand, a warranty also offers financial protection but only for faulty parts of the car. The car warranty vs insurance differences above will help you understand both better. You will need both for better protection and coverage of your car.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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