Recently, there has been a noticeable increase in the “car maintenance” insurance plans industry and advertising. There are lots of ad presented to the consumer as a great way to make sure that his or her car is covered if something happen, or God forbid if the “check engine” light come on.
First let us make sure that we understand that insurance companies make money, therefore, just like a casino, the consumer collectively must loose money. So they are not there because they care of give a damn about you and I, they are there because they are making money. And they are total overhead, i.e. they really add nothing to the pie. A mechanic might rip you off, but they have expertise to fix your car. Your doctor might rip you, but you hopefully are feeling better. Insurance companies expertise are by scaring and exploiting people, twisting the arms of doctors and hospitals, getting bargaining power to of a union, but unlike the union, they just pocket the money.
The same thing here, they are preying on the consumer inability to come up with couple of thousand dollars (which perhaps is a low estimate for major work on your car like engine rebuild), to make you buy their insurance. But in reality, if you take that money that you are going to pay them every month and put it aside, in couple of years you will have enough money to offset the cost of major works.
In addition, like usual, the tricks are usually in the fine print, what is covered what is not, what is normal wear and tear, and where you can take your car and how much they will pay and what is your “co-pay” if the shop did not accept that payment. It is like you medical insurance, you can really go anywhere you want, if you take the hit.
If your family has several cars, the cost might be few hundreds or thousands a year. While if you put all the money for all the cars in a “bank” and agree not to use it but for major expenses (engine rebuild, total AC system repair, replacement of transmission), you will find that on the long run you would have made much more money then if you bought their product. Before you rush into buying this product do the math. What is the probability vs the cost. And remember, unless the odds (collectively not individually) are against you, they insurance company will not be in business. So the more cars you have in your pool and the more money you put aside, you become you own insurance company.