Are you thinking about getting an extended auto warranty or a Vehicle Protection Plan? Does your vehicle have an existing issue that needs repair? If your car currently has a mechanical or electrical problem, it may seem like a good idea to buy extended coverage and then make a claim after your contract goes into effect. However, did you know that pre-existing conditions are not covered?

Why Pre-Existing Conditions Aren’t Covered

Just as you should carefully read your contract to see what is covered, you also need to know what is not covered. Pre-existing conditions are not covered and are a frequent reason for legitimate claim denial.  When buying a vehicle protection plan, you need to know that benefits are not provided for a condition which can be shown to have existed prior to the effective date of the contract, or which existed prior to the expiration of the manufacturer’s warranty.

Unfortunately, people do indeed make claims for pre-existing conditions on their cars, and they do it more often than you might think. People sometimes purchase vehicle protection plans with the full knowledge or suspicion that there is something wrong with their vehicle. They might think that they’re not really hurting anyone…but they are!

Adverse Selection

Since pre-existing conditions are not covered under a vehicle protection plan (a.k.a. “Extended Car Warranty”), submitting claims with full knowledge that they exist is committing fraud. It can occasionally be difficult for providers to deny these types of claims, so consumers are sometimes getting away with this fraud. However, be aware that providers many times do have the ability to determine if a condition was pre-existing and it can result in denial of a claim or worse.

When people make fraudulent claims on their contracts, it not only hurts the company but in the end it hurts consumers too.  Fraudulent claims on Vehicle Protection Plans are known as “adverse selection.”According to, adverse selection is:

“A situation where sellers have information that buyers don’t (or vice versa) about some aspect of product quality.” explains adverse selection as:

“When you do business with people you would be better off avoiding. This is one of two main sorts of market failure often associated with insurance.”

In the case of a Vehicle Protection Plan, adverse selection means that the buyer of the contract is aware of a pre-existing condition on a vehicle while the company selling the contract is not, so the company will most likely lose money on that contract. The prices of Vehicle Protection Plans are set according to an average risk of consumers making claims, but fraudulent claims made because of pre-existing conditions throw off the calculation of that average risk. This will result in the companies selling the contracts having to raise their fees for everyone and increase eligibility restrictions.

This is bad for you, the consumer, because it will be more difficult to get the coverage you need and will cost more. It could also mean that the underwriters of the contracts would not allow these contracts to be sold directly to consumers, but only through certain channels like dealerships and credit unions. This would likely result in even higher prices and fewer choices for consumers, which we can all agree are not good things.

Does Your Vehicle Have a Pre-Existing Condition?

So how can you help? If you already have a vehicle protection plan or are considering buying one, be aware of what is covered in your contract and of any problems that exist(ed) with your vehicle before buying your contract. Then, be careful not to make a fraudulent claim against your contract. This will ensure that you get a fair price for your vehicle protection plan and get the coverage you need, for your current and future vehicles!

If you are aware that your vehicle has a pre-existing condition and are still interested in purchasing extended protection, you can still benefit from this coverage.  Just be sure to take care of those repairs on your own before you apply for coverage.

If you don’t currently have extended coverage for your vehicle, what are you waiting for?  Having coverage will give you the peace of mind of knowing any mechanical breakdowns will be taken care of. Did you know that extended auto repair coverage can often pay for itself in just one auto repair bill? Third party providers, like autopom!, can give you great coverage for less money than packages offered through car dealerships, so you can have peace of mind and save even more money. Contact autopom! today by requestion a quote below!