Inclusionary vs. Exclusionary Warranty

What is an exclusionary warranty?

An exclusionary extended warranty is a vehicle service contract that explicitly lists the components that aren’t covered. Therefore, anything that isn’t specifically excluded is covered by the policy. Not all exclusionary warranties cover the same services, but they’re all alike in structure.

These are sometimes referred to as comprehensive or bumper-to-bumper warranties because of their extensive coverage. They’re most similar to a manufacturer’s warranty you’d receive when buying a new car.

Features and benefits

Providers often advertise their exclusionary warranty option as a Platinum or Diamond plan because it covers wear and tear on most vehicle systems and components. However, even though these are comprehensive plans, they don’t cover everything. Some common exclusions include:

• Wear and tear
• Routine maintenance
• Repairs due to misuse, accidents or lack of maintenance
• Cosmetic issues
• Environmental damage, like hail or floods

You may prefer an exclusionary warranty because it’s easier to understand and includes the most comprehensive coverage. And, though there will likely be several services you don’t end up using, the ones you do could end up saving you real money.

What is an inclusionary warranty?

An inclusionary warranty is a vehicle service contract that only covers specifically listed components. These are more restrictive plans that cover fewer services. Inclusionary warranties are also called listed item or stated component contracts, and, like any extended warranty, coverage differs based on the provider and the terms of the contract.

Features and benefits

Providers typically offer a few inclusionary warranty options. For example, an entry-level plan may be a powertrain warranty that only covers components like your engine, transmission and drive axle. A higher-tier inclusionary warranty may cover the powertrain while adding in components like air conditioning, steering, brakes and electrical.

Because they cover fewer components, inclusionary warranties are typically less expensive than exclusionary warranties, making them appealing to consumers, especially those with older or higher-mileage cars.

Differences between exclusionary and inclusionary warranties

The two biggest differences between exclusionary and inclusionary warranties are cost and scope of coverage. Both types of plans cover breakdowns of components in your vehicle, but the differences are important to understand when deciding which one offers the best value.

• Cost: Because they cover so many more components, exclusionary warranties are almost always more expensive than inclusionary ones. Comprehensive extended warranties can cost $1,000 or more a year, while powertrain warranties are around $600 to $750 per year.
• Coverage: Inclusionary warranties are more restrictive than exclusionary and cover far fewer components. Exclusionary policies are the most comprehensive, covering most vehicle systems and components.

Some car owners are comfortable paying more for the extra coverage and security an exclusionary warranty provides, even if they don’t end up using it all. On the other hand, more budget-conscious drivers may choose to save money upfront, knowing their future services will be limited.

Choosing the right warranty for your vehicle

No policy covers everything, and you’ll need to consider several factors when choosing an extended warranty. No matter what kind of vehicle service contract you opt for, read reviews and ask friends and neighbors for recommendations to ensure you’re working with a reputable extended warranty company. Here are a few factors to consider:

Vehicle age and condition

If your vehicle is older with higher mileage, it’s likely not worth the cost of an exclusionary warranty and that money may be better used saving up for a replacement. That said, you can get a lower-cost powertrain warranty for an older car that can give you peace of mind knowing your most expensive repairs are covered.

Exclusionary plans are often only available for newer vehicles or those under a certain mileage, and many new car owners want to safeguard their investment by purchasing one. Alternatively, a newer car with low mileage is likely to be more dependable, and you may not end up using the warranty at all.

Vehicle type

Certain types of cars gain a reputation for how dependable they are (or aren't). Before you buy, research your vehicle and learn about the issues other owners commonly face. If your car has known weaknesses, find a plan that addresses these. If your car is known for its dependability and workmanship, you may want to forgo an extended warranty altogether.

Coverage needs

If you want the same level of coverage as your manufacturer’s warranty or if you’re concerned about needing extensive services in the future, an exclusionary contract may be your best bet.

If you choose an inclusionary plan, make sure you fully understand its limitations since this can cause issues down the road. Ryan Hartman, founder of Chaiz, an online marketplace for auto warranties, emphasized that with inclusionary warranties, “ONLY the components stated in the contract are actually covered, which can lead to disputes during the claims process.”

That’s not to say inclusionary plans aren’t beneficial, but you don’t want to be caught unaware when filing a claim. “With exclusionary coverage, the risk of this happening is much lower, since every part is covered unless it’s specifically excluded,” Hartman said.

Your budget

Exclusionary warranties are more expensive than inclusionary warranties, and many people simply don’t have the money to pay the higher sticker price. In addition to the premium, also consider hidden costs like deductibles and service changes you may be responsible for paying.

» MORE: Highest-rated extended warranty companies this year

Additional coverage options

Whether you buy an exclusionary or inclusionary extended warranty, most providers allow you to customize your policy by adding on extra coverage. These add-ons are optional, but depending on the type of car and your needs, you may consider including one or more. These can include:

• Roadside assistance (though several providers include this for free)
• Electric or hybrid vehicle components
• Tire coverage
• Windshield damage
• Cosmetic damage
• Luxury electronics
• Key fob replacement
• Commercial, agricultural or rideshare use vehicles
• Wear and tear damage to covered components
• Collision repair discounts
• Maintenance package

Of course, adding any of these options will increase your overall cost. If you know you drive a lot or are concerned about future costs for specific services, an add-on may be worth it. On the other hand, if you know you’re a safe driver and would rather budget on your own for future needs, they may not be worth it in the end.