When buying an extended service contract for your Truck, you want value, coverage, contract protection, flexibility and convenience, and service.
Value – Often Truck buyers and owners forgo extended service contracts because the cost is hard to justify. Part of the problem is they don’t know where or how to shop warranties.
Note: Keep in mind that you don’t want to wait too long to buy your extended warranty. The longer you wait, the more expensive it will be. In other words, the older your Truck gets, the more it will cost to get extended warranty coverage. Just like your health or life insurance gets more expensive as you age, so does an extended warranty. Lock in the best pricing you can get as soon as you can.
Coverage – It is very important that you understand the coverage being offered. The contracts can be very complicated, but always try to get a copy of the contract so that you have plenty of time to review it before purchase.
Type of Coverage:
Exclusionary Contract – An exclusionary contract is what you want. This type of coverage includes every mechanical aspect of your Truck except for what is specifically “Excluded from coverage” or listed as “Exclusions” or “What Is Not Covered” in the contract.
Note: Exclusionary contracts can have multiple levels of coverage and may have specific provisions that exclude coverage in lower levels and include coverage in higher levels of coverage. Be sure that you request the most comprehensive coverage available.
Note: Though you want comprehensive coverage (the best coverage available in an exclusionary contract), depending on the year and condition of your Truck, that coverage may just be too expensive.
Contract Protection – One thing you don’t want to have to worry about is completely losing the money you invested in an extended warranty. You hope you don’t need the coverage or have any claims, but you certainly don’t want your money to disappear leaving you with no coverage at all.
Therefore, it is very important to check out the financial condition of the insurance company backing the Administrators’ “claims reserve account.” Ask about those insurers and get their A.M. Best ratings – look for “A-rated” insurers.
Be wary of “Risk Retention Groups” that are backing extended service contracts. They are not regulated as well as insurance companies and several have gone bust.
Flexibility and Convenience – When you are looking for an extended warranty, you want to be able to access repair facilities of your choosing wherever you may be at the time of a breakdown. Be careful of warranties that require you to use certain repair facilities or networks thus limiting where you can go for service.
Service – One thing that is often missing when you buy an extended warranty is service from your Contract Provider (the company from which you bought the contract). Unfortunately, too often there is little or no assistance from the people that sell you an extended warranty. Many simply want to make a sale and wash their hands of any future issues.
Other Items To Look For:
- Deductibles- Make sure you know the deductible and whether it is a “per visit” or “per item” deductible. You don’t want to pay a deductible on every repaired part, so make sure that you only pay one deductible per repair facility visit. Also, higher deductibles can mean a lower overall price of the extended warranty, and savings can be significant.
- Payment Of Claims- Be sure that the warranty Administrator pays the repair facility directly. It’s a big red flag if the Administrator requires you to pay the repair facility out-of-pocket and then submit receipts for reimbursement. Now, with that said, also be cautious of repair facilities that won’t work with warranty companies and/or that require you to pay them up front and you have to file your own claims to get reimbursed.
- Repair Facility Payment- Be sure that the warranty Administrator will pay the repair facility via corporate credit card. The repair facility doesn’t want to wait for a check and the sooner they get paid, the sooner you can be on the road.
- Retail Costs- Also, make sure the warranty Administrator pays full retail to the repair facility for parts and labor. They may disagree on the number of hours for the repair or on the parts to be used, but once they work that out, the repair facility should receive full retail prices.
- Transferability- Make sure that your extended warranty is transferable. There may be a small transfer fee, but if you sell your Truck, having the remainder of an extended warranty on it could make for a quicker sale. Of course, in the case of a sale, you may decide to cancel and get a check back (see “Cancellation” below) rather than transferring it.
- Cancellation- Determine what the cancellation policy is. Can you cancel within 30 or 60 days and get a full refund? What is the refund policy after the initial “probation” period? Many extended warranties will give a pro-rated refund based on the time left on the contract if you cancel. There may be an administrative fee to process the cancellation or refund, so know what that cost might be. Also, your refund could be reduced by any claims already paid out (which is reasonable), so be sure to know if that is the case.
- Inspections- Does the warranty Administrator require an inspection of your Truck? An inspection may be performed at the time of warranty purchase to identify any “pre-existing” conditions. Pre-existing conditions (mechanical issues existing at the time of the purchase of the extended warranty) are not covered, so an inspection helps identify those conditions and may prevent a claim denial later. Inspections are more likely if you are not currently covered by a warranty at the time of the extended warranty purchase.
- Additional Benefits- Many extended warranties have towing benefits, roadside assistance benefits, emergency repair provisions, lodging reimbursements, and other minor benefits. Often these have fairly low dollar limits, so know the details and don’t expect these benefits to substitute for a specialized Truck roadside assistance plan.
Next week, we’ll be talking about Getting the Most Out of Your Extended Warranty.