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Gina LaGuardia has more than 25 years of experience in senior editorial roles, and is an expert in personal finance topics, including banking and lending. She has created content for financial powerhouses such as Chase Bank, American Express Canada, First Horizon Bank, BBVA, and SoFi.
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When you file a car insurance claim following an accident, the insurance company will give you a detailed repair estimate. Although providers must pay for covered losses, they employ different tactics to mitigate the amount of money they must pay. One way carriers diminish losses is by not covering Original Equipment Manufacturer (OEM) parts.
Repair shops can use a variety of parts to get your vehicle back on the road. While most car owners might prefer parts produced by the original manufacturer, many standard auto insurance policies do not cover them. However, many insurers offer optional coverages that pay for the original parts you might favor.
Automobile manufacturers produce OEM parts for their vehicles. For example, Ford Motor Company produces replacement parts through several brands, including Ford Parts, Ford Motorcraft, and Ford Accessories. Typically, OEM parts are exact replicas of the parts used when the manufacturer assembled your car, so they fit perfectly.
You can also buy used and aftermarket parts. Third-party companies, not an automobile’s original manufacturer, produce aftermarket parts. These parts are easier to produce at a high volume, but oftentimes they are manufactured to fit several makes and models of vehicles, not a single automobile.
Let’s say your Ford needs a new ignition switch. If you take it to the Ford dealership for repair, they will replace it with a new OEM part. But if Joe’s Garage handles the repair, they may replace the part with one manufactured by ABC Auto Parts.
Insurance companies may or may not pay for OEM parts. State insurance codes vary, but some require insurers to cover OEM parts under certain circumstances. For instance, Minnesota law requires carriers to cover OEM parts, unless you agree to make repairs with aftermarket parts. However, this stipulation in Minnesota’s insurance code does not apply to vehicles you purchase used.
California’s insurance code requires repair shops to identify replacement parts as new, used, OEM, non-OEM, rebuilt, or reconditioned on all repair invoices. California law also stipulates that non-OEM parts must meet several standards related to fit, performance, quality, and safety.
To find out if your insurance policy will cover OEM parts, review its “Insuring Agreement” section. If your insurer will not pay for OEM parts, they may offer the option for you to pay the difference between non-OEM and OEM costs.
Although standard car insurance policies usually do not specify OEM parts coverage, some providers offer OEM endorsements or riders.
When you file a car insurance claim, the carrier is only responsible for restoring your vehicle to its pre-loss condition. That’s why, when allowed by law, insurers often write repair estimates that include non-OEM parts, which cost significantly less than OEM components. But there are ways to ensure that repairs are made to your vehicle using OEM parts.
Research your state’s insurance code to learn more about OEM parts requirements. For example, New Hampshire law requires insurance companies to pay for OEM parts for vehicles that are no more than two years old, with no more than 30,000 miles on the odometer. This law also applies to leased vehicles, when using non-OEM parts will diminish the car’s value.
However, the insurance codes in some states do not dictate OEM requirements. For instance, in North Carolina, repairs can be done on your automobile with aftermarket parts without your approval, but carriers are required to identify aftermarket parts on repair estimates and repair invoices.
Some auto insurance companies offer OEM parts endorsements or riders, which you can add to your policy for an additional cost. If you’re shopping for car insurance, and OEM parts are important to you, look for providers that offer OEM parts coverage.
Insurers may only offer OEM endorsements or riders for newer vehicles, typically those less than seven model years old.
If an insurance company isn’t required to repair your car with OEM parts, chances are it won’t. But, if you receive a repair estimate that includes non-OEM parts, you can usually pay the difference to get the OEM parts you want.
Mechanics like OEM parts because they fit perfectly without the need for any adjustments. For example, the mounting bracket for an OEM radiator would perfectly align with the mounting screw holes, just like the original part. Since OEM parts usually cost more than aftermarket parts, repair shops can make a higher profit with a higher markup.
Typically, repair shops can make adequate repairs using non-OEM parts. Oftentimes, aftermarket parts perform just as well as OEM parts. However, aftermarket parts sometimes require adjustments that OEM parts don’t. For instance, the mounting bracket of an aftermarket radiator might not perfectly align with the mounting screw holes. The quality of aftermarket parts ultimately comes down to the manufacturer.
In some cases, non-OEM parts perform just as well as OEM parts. But some car owners insist on making all repairs with OEM parts. If you typically only keep a new vehicle for a couple of years, maintaining original parts may offer a better trade-in value.
Bear in mind that, one way or another, insisting on OEM parts will cost more. You often have the option to add an OEM parts endorsement to your car insurance policy, but that will increase your premium. If you don’t have an OEM parts endorsement, and your insurer will only pay for non-OEM parts, you’ll have to pay the difference out of pocket.
If you’re buying a used automobile, ask the owner if it contains any non-OEM parts. If they’re unsure, hire a professional mechanic to inspect the car before you buy it.
Non-OEM parts can differ from OEM components in many ways. For instance, the screw holes in an aftermarket fender panel may be larger and more difficult to align than an OEM panel. Or an aftermarket radiator may have fewer cooling tubes than an OEM radiator.
Some automobile manufacturers sell OEM parts online. If you seek repairs from a local mechanic or body shop, they may or may not have access to OEM parts. If they must order parts from the manufacturer, the repair process might take longer.
Typically, new car dealerships are the best source for OEM parts. Most major dealerships also have a service department, with a parts counter.
Some aftermarket parts fit more than one automobile, while OEM parts fit specific makes and models of vehicles, which can increase manufacturing costs.
OEM parts are also an income stream for car manufacturers. Oftentimes, a dealer’s parts and service revenue can help balance the books when new car sales drop.
