Mechanical breakdown insurance - why you don't need it
Don't buy what you don't need
Our mechanical breakdown insurance infographic shows why you
shouldn't buy this type of add-on insurance product when you
purchase a car from a dealer.
Mechanical breakdown insurance: why you don't need
The cost of mechanical breakdown insurance (MBI) from a car
- $1,482 - average premium paid upfront1
- $940 - average claim paid out2
- Only 1 in 10 people made a claim on their MBI
What happens when you buy mechanical breakdown insurance?
|Both buy a new car for
$30,000 from a car dealer
Buys an MBI policy from a dealer
Doesn't buy an MBI policy
|2 years after purchase,
both cars' brakes fail
|Both cars are fixed for
free under the 3-year new car warranty
|4 years after purchase,
both engines fail
MBI insurer covers the cost of
repairs to Mitchell's car4
Manufacturer fixes Amelia's car
under Australian Consumer Law4
|Amelia is $1,482 better
off than Mitchell because her car was fixed even though she didn't
Be prepared for the hard sell
Dealer: If I sell this MBI policy, I'll get a commission!
Questions to ask the car dealer before you buy
- How much commission will the dealer get if I buy
- What will the MBI premium cost me?
- What repairs are not covered by
- What does the MBI cover that Australian Consumer Law
- When does the policy start and
Don't buy what you don't need. Find out more about mechanical breakdown
- Average upfront premium paid for new policies purchased between
1/07/12 - 30/06/15 (ASIC report- A market that is failing
consumers: The sale of add-on insurance through car dealers)
- Average claim paid out between 1/07/12 - 30/06/15. (ASIC
Report- A market that is failing consumers: The sale of add-on
insurance through car dealers)
- Number of successful claims on MBI policies between 1/07/14 -
30/06/15. ASIC data not publicly available.
- All consumers have the right under Australian Consumer Law to
have their car fixed or replaced by the manufacturer if the
product is not of acceptable quality. For more information, visit
the ACCC's webpage on consumer guarantees.
- All MBI policies have a list of exclusions, so make sure sure
you understand what the policy does not cover.
- MBI policies start after the end of any manufacturer's or
dealer's warranty provided with the car. The length of time
and kilometres covered by the policy can vary, so it is
important to ask the dealer about this.
Last updated: 09 Sep 2016