Is an aftermarket car warranty right for you?
Commonly called an “aftermarket car warranty” a Vehicle Protection Plan is an excellent investment that can protect you from the high costs of unexpected repairs.
An extended warranty is only sold by the manufacturer however, a “Vehicle Protection Plan may be sold by a third party. Both plans provide similar coverage however only the manufacturer can call their coverage a “warranty” or “extended warranty” If your car needs repair, the shop will call the plan Administrator for authorization and if the issue is a covered repair, the claim will be approved and paid per the terms of the agreement (read the agreement).
Many people think that they do not need to purchase an aftermarket car warranty or Vehicle Protection while the manufacturer’s warranty is still in effect. Keep in mind, though, that the cost for coverage rises as the car ages and the mileage increases. However, once you purchase the coverage, your rate class will not change, so buying earlier will allow you to acquire long term coverage at the lowest possible rates.
Here is what we will cover in this article:
- Third Party vs. Manufacturer’s Extended Warranty
- What Company Backs the Coverage?
- Choosing a Vehicle Protection Plan (commonly called an “aftermarket warranty”
- What To Look For
Third Party vs. Manufacturer’s Extended Warranty:
There are two main types of extended warranties:
- Those offered by the vehicle manufacturer
- And ones provided by third party companies, Vehicle Protection Plans (VPP)
Vehicle Protection Plans, like the ones sold by autopom!, offer many benefits for the consumer. They are often easier to use, less expensive, and include a broader range of coverage options than warranties offered by the manufacturer. A manufacturer’s extended warranty is purchased from a authorized dealer and is basically a continuation of the original warranty. In this case, any covered repair work typically must be completed at a dealership. However, most third party providers allow you to take your car to any certified repair facility, giving you much more flexibility. Also remember that many dealers choose not to offer the manufacturer’s extended warranties and instead sell vehicle service contracts.
What Company Backs the Coverage?
It is important that you know the reputation of the company that stands behind your agreement. In other words, make sure the Administrator is backed by a quality insurance company (A rating or better by A.M. Best).
The Administrator is the company that authorizes payment for any needed repair work, and it is the job of the insurance company to make sure that the Administrator (or third party) is handling claims per the terms of the agreement. They guarantee that the terms of your agreement will be honored, even if the Administrator were to close up shop. With the number of dealerships and third party businesses shutting down, it is vital to have a reputable insurance company backing your policy, or you could find yourself in an unfortunate situation when it comes to filing a claim.
In some cases, the administrator and the insurer underwriting the policy are the same company. This can be beneficial to the consumer since there is a lower risk of the Administrator failing to meet their financial obligations. Also, buying the contract directly from an insurance company that owns the Administrator often means lower prices.
Choosing a Vehicle Protection Plan (commonly called an “aftermarket warranty):
When choosing an company for your extended coverage, here are a couple of things that you should consider:
- The company should have a long history of providing extended coverage plan protection. Find out how long the company has been in business and make sure they are financially sound. Remember, the longer the history, the less likely they will be to go out of business. You want to choose the warranty provider with the lowest risk so you have the peace of mind knowing they will be able to honor the agreement when you need it.
- Check out the reputation of the company. Make sure it is a legitimate business with high scores from major rating services. The company should have an “A” or better rating from both the Better Business Bureau and A.M. Best. It only takes a few minutes to visit A.M. Best’s website to check the financial stability and reputation of the insurance company or third party provider that you are considering. Doing your homework could save you a lot of money and hassle in the long run.
What To Look For:
To ensure that you get the best coverage for your needs, it is helpful to know what to look for in the coverage contract.
- Determine the type of coverage you want. Are you looking for an exclusionary contract (commonly but incorrectly referred to as “bumper-to-bumper”? This type of coverage names a short list of components that are excluded and everything else is covered per the terms of the agreement. Or, perhaps your vehicle is a bit older with higher mileage and doesn’t qualify for exclusionary coverage. In that case, you will want to consider a “Named-component” coverage plan. These plans named the components that are covered per the terms of the agreement. In order to be covered, the failed component must be named in the agreement.
- Who administers the coverage? As already mentioned, check out the reputation of the seller and Administrator as well as the underwriting insurance company.
- Know the terms of coverage. Depending on the company, there could be several levels of coverage options, and it is important to know what is included in each level. Clarify all ‘definitions’ (for phrases such as “wear and tear”, “bumper to bumper” etc.), check for exclusions, and read the fine print. You can even request copies of the contracts that you are considering so that you can compare the terms before making your final decision.
- What are the repair facility options? Do you have to take your vehicle to the dealership or can you have repairs completed at the service facility of your choice? The best companies allow you to take your vehicle to any ASE certified repair facility.
- How are the claims handled? Do you have to pay the money up front and then wait to be reimbursed? Look for a company that handles all aspects of the claim, including paying the repair facility. You want to find coverage that will offer the least amount of inconvenience or expense.
- What is the deductible? Ask about the amount and if it is applied per visit or per repair. This could make a difference in your out-of-pocket expenses, especially if you are having several repairs completed at once.
- Is the contract transferable? A Vehicle Protection Plan can be very appealing to prospective buyers and will increase the re-sale value of your car, so make sure the policy can be transferred to a new owner.
When purchasing a Vehicle Protection Plan, you want to find the coverage that best fits your needs. A protection plan is supposed to provide you with peace of mind and security knowing that you are protected from the expense and inconvenience of mechanical and or electrical failures. Choosing a reputable company will make sure that all your claims are handled properly and per the terms of the agreement. Yes, mechanical breakdowns are an interruption to your everyday life, but with the right company backing you, repairs will be much less painful. Request a free, no-hassle quote from autopom!