It’s often not initially clear to most people what the difference is between car warranty cover and car insurance cover, and often they are thought to be one and the same. Over the years, we’ve had many questions from people asking why their warranty won’t cover certain costs that are really insurance issues, and vice versa.
What tends to cause at least some of the confusion is that a warranty is actually a specific type of insurance policy for your car, but it’s a different kind of cover to ‘car insurance’.
The two products are significantly different forms of consumer protection and each is aimed at protecting you and/or your car in different ways, although there may be some overlap at times – which can cause further confusion.
In conjunction with our commercial partner, ALA Insurance, we help you understand the differences below.
Car breakdown: car warranty
You’re driving along and suddenly your dashboard lights up with a bunch of warning lights, while at the same time smoke and steam start to rise from under your bonnet. Assuming you have a valid warranty on your car, that’s what it’s there for.
If you have a new car warranty, it should cover almost any failure that occurs during the warranty term – even a catastrophic engine failure. If it’s an aftermarket warranty, it will depend on the level of cover you have paid for. It may cover you for a certain level of expense, but you may have to foot the bill for anything above that amount.
Your warranty cover will assume that you have had the car serviced on time and every time, following the servicing instructions set out by the manufacturer. It will also assume that you are driving normally – illegal activity like street racing won’t be covered, and track days are normally excluded as well.
Accident protection: car insurance
Unfortunately, some events occur can cause damage to your car beyond the proper functioning of parts. For example, if you have an accident that damages your car, you’d be calling your car insurance provider rather than your warranty provider. Car insurance is also important for making sure you are covered if your car causes damage to someone else or their property.
Sometimes you can’t prevent such things from happening, and an accident or incident may not be your fault at all. Most car insurance policies will give you some sort of cover here, so it can be crucial to ensure you don’t have to pay huge sums out of your own pocket for an accident that wasn’t your fault.
Component failure: car warranty
A warranty doesn’t just apply when your car is stuck by the side of the road with steam pouring out of it. Any time your car has a part that malfunctions in the normal course of driving, like a mirror or tail light, it will be the car warranty that you turn to (assuming you have one, of course).
Essentially, a warranty will ensure that your car parts do what they’re supposed to do for the length of time they’re supposed to do them. If one of them fails due to no fault of your own, your warranty should cover you for some or all of the cost of a replacement part and its installation.
Aftermarket warranties will often cover you for certain components but not others, so be sure to check what a policy offers before handing over your cash. There may also be a limit to the value of each component covered, so you may still have to pay for any additional cost over that limit.
An aftermarket warranty policy may also allow a garage to fit used parts instead of brand new ones. Check your policy before making a claim or before any work is done on your car.
Car or personal belongings theft: car insurance
If your car is stolen, or if personal items from your car are taken, that’s covered by your car insurance. Theft isn’t the fault of the car, even if your car is faulty, therefore it’s not covered by your car warranty.
Should your car be stolen and not recovered, your insurance policy would usually write you a cheque for the market value of the vehicle. This might also be a good time to mention that ALA offers a special deal on GAP insurance for our readers.
Failures causing accidents: the importance of each type of protection
It can get more complicated if you start talking about a situation such as the brakes failing in your car, which then leads you to rear-ending another car.
This is a good illustration of the potential overlap between your car warranty and your car insurance, since the warranty may cover the brake failure but it wouldn’t usually cover the damage you have done to the other vehicle. That would rely on you going through your car insurance provider to claim for any damages.
It’s important to know who is providing the warranty on your car so that you know who to talk to in the event of a problem. If the warranty came with the car, the dealer should have given you all the relevant paperwork. If you bought a car warranty online, all of the policy information should have been sent to you. If you’re unsure about whether your problem is a warranty or insurance issue, give both of the a call to discuss the problem and ask questions.