But what about oil changes? At first glance it would seem silly for an auto insurance policy to cover routine maintenance like an oil change. But what if an auto insurance policy covered powertrain failures in addition to loss and damage from collisions, theft, etc.? In a hypothetical case like that (which might be a good parallel to medical insurance), the insurance company has a huge financial incentive not only to cover oil changes, but to require you to have the oil changed regularly as a condition of maintaining your insurance.
Well whatever it is, it isn’t quite an insurance policy now. It’s maintenance.
It is possible to buy coverage for your transmission. It’s called an extended warranty. The warranty company is gambling that your car won’t need it, and that they’ll take your money having had to pay out nothing.
Insurance versus warranty: what’s the difference? One is geared toward the truly catastrophic events with repairs, injuries, and lawsuits in mind; that is, protection against levels of cost that could financially ruin a family. It is coverage against catastrophe.
An original warranty is a guarantee by a manufacturer about the quality and durability of their product. An extended warranty is, as you suggest, a maintenance plan. For the lion’s share of households in the USA auto maintenance of any kind won’t cause financial ruin.
The parallel, though, even between aspirin and a car maintenance plan, really is about a minimal expense that is so small that it probably costs more to process the claim than it does for the individual to pay for the bottle of aspirin. In that sense, it’s a losing proposition for the company. There is no way to recoup such an expense. That is why I suggested “car fragrance” as a parallel, but even an oil change at $21.99 at WalMart is probably less than the cost of processing an oil change claim. And since every car needs oil changes, it would be a continual expense for an insurance company that they could never hope to win a gamble on unless they were careful to have their price include the cost of both the items for an oil change + their cost of processing the claim.
So, some expenses are actually cheaper for me to personally handle. Along comes the government, though, and requires it to be covered in a car insurance policy. They are unnecessarily costing me more than I can have it done myself.