Why Not All Extended Warranties Are the Same

Written by David Wheatly

It’s only natural that the more kilometers you put on your vehicle, the greater the chances are that it will experience some type of mechanical failure.

This is where an extended warranty comes into play, providing the cover you need when you need it most–when your car is older and more likely to experience an issue.

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Car manufacturers are happy to offer a 3-year / 60,000 Km warranty, but what happens when your car needs repairs after this period?

The Fine Print

Despite their overall usefulness, however, you should be aware that not all extended warranties are created equal. In fact, some of these warranties won’t end up saving you very much, if at all, because they have too many exclusions, can’t be customised, or have other limitations. The problem is that many of these limitations are in the fine print of the warranty policy, so it can be difficult to decipher what you’re getting at first glance. Unfortunately, it is likely that you’ll need to go through all the fine print to know exactly what you’re getting so you can decide if a particular policy is worth buying. But whether stated clearly up front or in the fine print, here are the key things you should look for that separate the good extended warranties from the not-so-good ones.

What Isn’t Covered?

Precisely what exactly isn’t covered in your policy is one of those things that’s typically hidden in the fine print. This is known as an exclusion list, and it’s pretty much left up to the insurer what this list includes. One thing that insurers often include in this list is any part failure that’s the result of wear and tear as opposed to a breakdown. Other examples of exclusions include overheating–meaning that any part failure that results in overheating wouldn’t be covered, failure of electronics and control units, and ABS brake failure. You may have the option to pay more to have certain exclusions covered, which is something that could certainly be worth it to you, but the important thing is that you are okay with what is and isn’t going to be covered before you sign the contract.

Customised Coverage

Along those same lines, what level of policy customisation does the insurer offer? People only want to pay for what they use, and only if they think it’s worth the price, so it’s a bonus if the insurer will allow you to drop certain things to save money and add other things that you think are worth it.

Approved Repair Shops

Another thing to be aware of is that some policies only allow you to get repairs at a select few repair shops. So even if you’ve found a great mechanic that is affordably priced, you may not be able to use him. Also, it can be inconvenient if the nearest approved repair shop is more than a few miles away. Because of this, you’ll probably want to choose a policy that includes a wide network of repair shops.

Policy Excess or Claims

Like your comprehensive accident insurance, many extended warranties will impose an excess each time you make a claim. Sometime the excess you are expected to pay is hundreds of dollars and that is assuming the policy you purchased will even cover the repairs required. Before you purchase your extended warranty, clarify the amount of excess you will be asked to pay when making a claim. The best policies, with the best coverage typically give you the option of choosing no excess at all or a scale of excess capped at around $150.

Company History

Lastly, if an insurance company has only been around for a year or so, how do you know if they will still be in business a year or two into your policy? And on top of that, how do you know if they’re reputable and will actually pay out fairly on claims? For these reasons, getting an extended warranty from a well-known insurer that’s been around for a long time is preferable to choosing a young start-up company. Keep in mind that having a good warranty policy is only half the equation; the other half is knowing that if something goes wrong, the company will pay out on your claim in a timely manner.

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Posted in Car Insurance Blog, New Car Extended Warranty Insurance, Used Car Extended Warranty Insurance

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