A wide range of motor warranties are available to protect you against the costs of sudden and unforeseen failure of specified components of the motor vehicle.
A motor warranty protects you against unexpected failure. They are not always maintenance contracts and do not cover breakdowns that arise through normal wear and tear. The policy terms and conditions should always make these points clear.
The components covered by a warranty vary according to the age and mileage of the vehicle. A range of policies is available from wide protection on new or very young, (low mileage) used vehicles to more limited cover for older or higher mileage vehicles.
You may be offered a choice of the level of cover for the vehicle you are buying. Generally, a policy covering a wide range of components will be more expensive than more restricted cover. Cover applies strictly to the failure of specified components only; if the component is not listed for cover in the policy, the repair is not covered.
Policies usually pay for parts and labour charges incurred in the repair or replacement of an insured component. Policies often have a maximum amount payable for any claim; you should check these limits in view of the cost of breakdown for major components.
Some policies have a betterment clause that requires you to pay something if your vehicle is improved following repair. They may also have a maximum amount payable during the term of the policy. Some components may have specific claim limits applied as well.
For new cars, cover is usually for 12 or 24 months after the manufacturer´s guarantee expires, but longer periods of cover are also available.
For used cars, periods of cover offered will vary from 3 to 36 months from date of purchase.
Is there anything I should think about when buying a motor warranty?
Additional Benefits
Mechanical breakdown policies may include additional benefits, such as towing-in charges, tyre care, MOT insurance, car hire costs or overnight accommodation.
These benefits only apply in conjunction with a valid mechanical breakdown claim and are often subject to separate conditions and limits.
Vehicle servicing
Most motor warranties require the vehicle to be serviced by an appropriate dealer, at minimum intervals as specified in the policy. This is a crucial condition of the policy and the policyholder is responsible for making sure that correct servicing is carried out at the intervals specified. Failure to do so could result in a claim being refused.
Common exclusions
Only components specifically listed in the policy will be covered. If a breakdown occurs due to a component not specified in the policy, the repair will not be covered.
Where can I buy a motor warranty?
When you buy a new car through a dealer, you will get details of the policies they offer. Cover may also be available from the manufacturer and the dealer may be able to provide details of this too.
For a used vehicle, the cover available will depend on the age and mileage. Your dealer will be able to provide details of the policies they offer.
Cover is also available from some insurance companies, brokers, motoring organisations, banks or other financial institutions (especially if you are borrowing money to buy the car).
Some mechanical breakdown insurances have an option to renew the cover for a further 12 months when your policy runs out.
Other useful information
How do I make claim on my extended warranty?
Refer to the claims procedures in the policy terms and conditions before you arrange repairs. These will give you full details of how to claim and what to do.
Some policies pay the repairer direct. Others will ask you to pay the repairer and send the invoice to the insurer/administrator for reimbursement.
What other types of extended warranties are available?
Breakdown or warranty policies are available for a wide range of other items. Office machinery, yachts, earth-moving equipment, fitted kitchens and household furniture are all examples where policies are available. The basic principles of cover are similar to those for household appliances and cars, but the policies have different specific conditions.
Understand your cover
All insurance policies are important documents. Read your policy carefully as soon as you receive it. If you do not understand, you should ask the person who sold you the policy, or the insurer, to explain. All policies have a cooling off period, whereby you can cancel the policy with a full refund, subject to no claims being made, if you wish to reconsider your decision.
Is it insurance?
Some warranties are not insurance contracts. These usually have names such as service contracts or guarantees. With service contracts, your payments are put into a pool that is used to pay claims. In many cases this pool is protected, so that if the retailer/insurer goes bust your claims would still be paid. But that is not always the case. You should receive information at the point of sale whether you would be covered in the case of insolvency.
Recent developments
In December 2003, the Competition Commission published the report of its enquiry into the sale of extended warranties for household appliances. The DTI implemented the Competition Commission´s recommendations from April 2005.
Key DTI changes are:
- The price of the Electrical Warranty has to be prominently displayed on or near the electrical goods it applies to. This requirement is applicable to in-store, catalogue or on-line retail sales.
- The customer has a right of cancellation after purchase of their electrical goods of up to 45 days for a full refund and pro-rata thereafter.
- Customers have to be reminded by the retailer about their right to cancellation. This reminder must be provided at least 20 days before the cancellation period ends.
- A written quotation setting out the purchase terms of the EW must be valid for up to 30 days after purchase of the goods.
- Relevant policy information must be provided at point of sale.
Further to the report, the Government decided that extended warranties sold by electrical and furniture retailers will not come under the scope of the FSA regulation of general insurance. Motor retailers are now regulated.
