Industry Tips
Service Contracts/Extended Warranties
When considering the purchase of a service contract, it is important to weigh the cost of the contract against the cost of possible repairs of the product. Also, compare the service contract to the manufacturer's warranty to ensure that there will not be wasteful overlapping coverage. Be aware of vaguely worded exclusions or limitations in coverage or overburdensome maintenance requirements which, if not followed, would allow the company to deny coverage. Find out how repairs are paid for and if you must obtain prior authorization. Ask who is backing the contract financially: the dealer, an independent firm, or an insurance company. Some states require companies selling service contracts to have back-up insurance in case the company goes out of business. Get the name and address of the person responsible for providing the contract and make sure you get all cancellation privilages in writing. Most importantly, make sure you see and receive a copy of the actual contract before buying it. You cannot get the complete provisions of a contract only from reviewing a brochure.