Dave Ramsey Says to ‘Save Your Money and Skip This Coverage’

Are some types of car insurance coverage really necessary?

Drivers want to make sure they have sufficient auto insurance coverage to protect their assets. This doesn't mean they want to waste money on unnecessary protection, though.

It can be hard to weed through what kinds of auto insurance are worth purchasing and which to skip. But this advice from finance expert Dave Ramsey could help you to avoid wasting some of your hard-earned cash on a specific auto-insurance add-on that's unnecessary in most situations.

Skip this coverage, per Dave Ramsey

So what kind of insurance coverage does Ramsey recommend skipping? It's called mechanical breakdown coverage.

Mechanical breakdown car insurance provides a similar purpose to a vehicle warranty. It's usually available only on newer cars and it pays for unexpected repairs that become necessary if a vehicle suffers a breakdown. While the details can vary by insurer, typically:

• Drivers get coverage for all of the parts and systems of their vehicle.
• Drivers have the option to get their vehicle repaired by any auto mechanic.

While this may sound like a smart purchase, Ramsey doesn't believe that it's a wise investment. "If you're on a first-name basis with your mechanic, you may be tempted to sign up for mechanical breakdown insurance because it allows you to choose where your car is repaired, as long as the mechanic is licensed," Ramsey said. "Our advice? Save your money and skip this coverage."

What should drivers do instead?

Ramsey is absolutely right that mechanical breakdown coverage usually does not make a whole lot of sense. And there are a few reasons why that's the case.

The biggest issue is that mechanical breakdown coverage is typically available only on relatively new cars. These may be covered by the manufacturer's warranty already, so mechanical breakdown coverage could duplicate protections that are already in place. These types of newer vehicles are also less likely to experience the kind of mechanical issues that would cost a lot and thus are worth insuring against.

Mechanical breakdown coverage also typically lasts only for a limited time. For example, the coverage may need to be purchased within the first 15 months of car ownership and may last around six to seven years or until the vehicle has 100,000 miles on it. So by the time it really becomes likely that big issues will arise, the coverage may have ended and drivers may not be able to buy more.

It generally doesn't make a whole lot of sense to waste money on coverage that most drivers probably are not going to end up using. Especially when there's a better option out there.

"If you still want to use your favorite mechanic, use your emergency fund to pay for emergency repairs—that's what it's there for," Ramsey said. Drivers can set aside money they would have paid for premiums for mechanical breakdown coverage to help create a fund for car repairs that they can use. This way, the money will still be there and offer important protection once the car gets older and more serious issues are likely to happen.