When Does Car Insurance Cover Engine Failure?

Many years ago, my dad bought a used car and, within a short time, discovered there was a major problem with the engine because the prior owner hadn't changed the oil. The severe engine damage meant replacement was necessary, and the repairs would cost thousands.

Fortunately, the car was under warranty from the company he bought it from, and that company paid to make the fixes. But, had that not been the case, the big question would have been: Does full coverage insurance cover engine failure?

If you have an engine issue that a dealer isn't going to fix and you're looking to find out if your comprehensive car insurance will foot the bill, this guide will help you figure out the answer.

Key takeaways

Car insurance usually won't pay for engine failure caused by wear and tear or failure to maintain the vehicle.
If you have mechanical breakdown insurance, it's possible your engine failure will be paid for by your auto insurer.
If you can show the engine failed because of a cause covered by your auto insurance policy, your insurer should pay to fix it.

Accident caused engine failure

Car insurance doesn't cover everything that goes wrong with your car — even if you have collision or comprehensive coverage.

Your collision coverage will pay for accidental damage to your car resulting from a crash while your comprehensive coverage pays for theft or other kinds of accidental damage not resulting from a collision, such as problems with the car caused by a natural disaster.

If you can prove engine failure occurred due to a covered cause, your insurance should pay to fix the problem. For example, if a flood caused your engine to fail or you caused a crash that damaged your engine, your comprehensive or collision coverage should pay. Or, if someone else hit your car and damaged your engine, their liability insurance coverage would cover repairs.

Since engine failure can be very expensive to repair, insurers might provide the funds to rebuild or replace the engine. Alternatively, they may declare the car a total loss and pay you the actual cash value of the vehicle instead because it's not worth investing in repairs.

What an insurer typically won't do, though, is pay for engine failure resulting from routine wear-and-tear or from negligent maintenance. If your engine fails because your car is old or because you didn't change the oil, your insurer is going to tell you you're on your own.

Warranty

If your auto insurance won't cover your engine repairs, will your warranty? The answer is that it depends on the terms. In my dad's case, the company he bought the used car from warranted it for 100 days, so they took care of the issue — but things aren't always so straightforward.

If you have a warranty from a car dealer or you bought an extended warranty, you should read the fine print.

Usually, engine repair or replacement is covered if something went wrong due to a defect in the workmanship or design. But, if you simply didn't maintain the car or if the engine gets old due to normal wear and tear, you shouldn't expect the warranty company to pay to fix the issue and get your car back on the road.

Mechanical breakdown insurance

Many auto insurers offer mechanical breakdown coverage that covers the major components of your car — including your engine — if sudden and unexpected failure occurs. This type of coverage can pay for things your standard vehicle warranty won't and problems with the car that occur when the manufacturer's warranty expires.

You'll typically have a deductible if you have mechanical breakdown coverage. You have to cover that deductible out of pocket before your insurer begins covering the bills. Once you have done that, your insurer pays for the rest of the covered repairs.

You'll also want to read the fine print on your mechanical breakdown policy to ensure that the particular issue with your engine will be paid for as routine wear-and-tear usually isn't covered nor are repairs resulting from negligent maintenance.

What happens next?

If your engine is blown, you should review your car warranty terms carefully if the vehicle is under warranty. You should also review your auto insurance policy and read the fine print to find out if this particular issue is covered.

If you discover you don't have any coverage, you'll have to decide what to do next. You can pay out of pocket for the repairs if you can afford it. However, you'll want to make sure it's worth it. If your car is worth $5,000 and a new engine would cost $4,000, spending the money to fix the vehicle may not make sense — especially if other problems could creep up soon.

Unfortunately, whether you fix the engine or not, if you have an outstanding balance on your auto loan, you will still be responsible for paying it even if you can no longer drive the car. Otherwise, your insurer could initiate collection activities against you. They could repossess the car to sell it, and if they don't recover enough in the sale, they could still pursue legal action to collect the rest. Keep in mind, having a car repossessed can drop your credit score by as much as 100 points, and the repossession stays on your credit report for up to seven years. That is significant damage to your credit, so you want to do everything in your power to avoid having a car repossessed.

Some companies do buy cars with blown engines, so you could try to sell yours to collect the funds to pay your loan, but you may not get much.

You could also look for a dealer that accepts trade-ins in "any condition" and is willing to accept the car with the blown engine. If you trade in the old car and buy a new one, sometimes you can get a car loan from a dealer large enough to both buy the new vehicle and pay off your outstanding balance from the old car.

This is not the best financial decision; you'll end up owing more than your new car is worth. You could have problems if the car is stolen or totaled unless you pay for optional new car replacement coverage. But it can be an option as a last resort to qualify for the new loan when you need a vehicle to get to work.

FAQs

Will gap insurance cover engine failure?

Gap insurance doesn't cover engine failure. Gap insurance pays the difference between the outstanding amount you owe on an auto loan and the fair market value of your vehicle, which is what the insurer pays you if your car is stolen or totaled (damaged beyond the point where repairs make sense).

Is a blown engine worth fixing?

A blown engine may be worth fixing, depending on how much the cost of the engine is relative to the value of the car. If you have mechanical breakdown coverage or a car warranty, it may pay to make the fixes so you can avoid the large out-of-pocket costs that come with engine repairs.

How do you get rid of a car with a bad engine?

If you have a car with a bad engine, you may be able to sell it. Some companies buy cars in all conditions. You may also be able to trade in the vehicle with a dealer who accepts cars in any condition (many advertise that they do). Keep in mind that if you have an auto loan on the car, you'll need to pay off the balance in full if you sell or otherwise want to get rid of the vehicle.

Smart Drivers, Smarter Savings

Ohio: Say Goodbye to High Auto Insurance Rates if You Live in These Zip Codes

See if you qualify for a lower rate in less than 2 minutes

Start Saving

By clicking the button above, I understand and agree that this site uses site visit recording technology (provided by Trusted Form, Jornaya, and Microsoft Clarity) Privacy Policy

Bottom line

It's really upsetting when something happens to your car's engine, especially if you don't have an insurer or a warranty to pay for the expensive repairs.

If this happens to you, read your insurance policy carefully to understand what protections you have in place. You may be able to get mechanical breakdown coverage to pay the bills if you have that optional coverage. Of course, if the damage to the engine happened because of a covered loss such as an auto accident, then you should be reimbursed.

If you don't have insurance coverage, though, you can explore other solutions like paying for repairs or trading in the car. You may also decide you want to upgrade your insurance for the future, so you don't find yourself in a similar situation again.

Save On Your Auto Insurance