Car Warranty vs Car Insurance: What's the Difference?

This is an article to help you understand the difference between a car warranty and car insurance. Read this comparative guide to learn which you need and which is right for you.
Written by Nicholas Wilson
Reviewed by Carrie Adkins
While a car warranty and
car insurance
sound very similar, the reality is that they are very different and protect your car in different ways.
You've just
bought a new car
. Now, do you need a car warranty, car insurance, or both?
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What is a car warranty?

The principles that apply to a car warranty are no different than those that apply to any other type of warranty.
Basically, the idea is that your car is protected against mechanical defects as specified in the terms of the warranty. Generally, new cars come with a manufacturer’s warranty that extends for a certain period of time or miles. The term of these warranties differs. Often, this sort of warranty is built into the price of the car.
Items covered include electronics and engine components, but parts like tires or wipers are generally not covered.
You can also purchase an auto warranty. By doing this, you are paying extra to safeguard your investment against mechanical defects. The coverage specifics depend on the details in your warranty agreement, so be sure you know what you are getting into before you pay.

The basics of car insurance

While a car warranty isn't necessary, some form of car insurance is
required in all states
except New Hampshire.
You can either get the minimum liability car insurance, or you can opt for a more complete package that includes comprehensive coverage, collision coverage, and more.
Liability insurance covers damages you cause to another driver because of an accident for which you are to blame, but does not cover any damages to your vehicle. Collision coverage pays for damages to your own vehicle from an accident, and comprehensive insurance pays for damages to your vehicle that might occur outside of an accident, such as hail or theft.
While liability is required, comprehensive and collision aren't always necessary.
There are monetary limits to the amount of coverage you have, and each plan is different. Further, most comprehensive plans have deductibles that need to be met before insurance kicks in.

What's the difference?

The main difference between a car warranty and car insurance is that a warranty only covers mechanical issues that pop up over time, and car insurance covers accidents and other situations that cause your vehicle (and other people) to get damaged.
Your car experiences wear and tear over time. Car insurance is meant to protect you in unexpected situations, so it won't cover normal wear and tear repairs. That's where a warranty can help.
Car insurance is a necessary part of owning a car. A warranty can be a nice addition to help you when your car breaks down, but it isn't compulsory.

Choosing between car insurance and a car warranty

Evaluate your situation. As with any decision, you should try to take every factor into account before moving forward.
The reality is that deciding between car insurance and a car warranty is probably not an "either/or" situation. After all, you're required to have a minimum amount of car insurance.
It's generally a good idea to have a warranty for your vehicle, but be careful not to get roped into a costly extended warranty. Choose a warranty wisely. Most new vehicles will come with a manufacturer's warranty, which is a good option.
If your car is new, you probably already have a manufacturer's warranty, and you should definitely have liability insurance. You then need to decide if you want to add comprehensive and collision coverage.
If you used a
car loan
to buy your vehicle, your lender will probably require you to have comprehensive and collision. But even if you didn't take out a loan, you should still get comprehensive and collision coverage. If you're in an accident without the right coverage, you could be financially ruined.
Match your needs to your protection. Maybe your biggest worry is mechanical issues, maybe it's other drivers, or maybe a combination of both.
Match these worries and needs to your coverage, and you’ll end up at a comfortable level of total protection.
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