When an item is sold, it always comes with what is known as an implied warranty. This is because the seller suggests that the item is sold as described, in good condition and is suitable for what it was sold for. This can give consumers rights over companies even when there was no written warranty.
When it comes to other products, written warranties or guarantees are often provided. The policies will generally be provided by the manufacturer or supplier. Sometimes the warranty can be treated as insurance and will be underwritten and regulated as such.
What is the difference between a guarantee and a warranty?
A guarantee is a completely legally binding agreement, but a warranty isn’t always. If you have a guarantee, then you will have a better chance of being able to claim if things go wrong successfully.
With a warranty, you might have to fight harder to get a replacement, repair or refund. A guarantee is not always legally binding, and sometimes you will have to go to a small claims court to claim damages.
What is warranty insurance?
Warranty insurance, or sometimes an insurance warranty, is when the warranty is treated as an insurance policy. This means instead of coming directly from the supplier or manufacturer, the warranty you have is with an insurer.
This gives it better protections than are provided by a standard warranty, as the insurer will be legally responsible for protecting your purchase. All insurance companies are authorised and regulated by the Financial Conduct Authority (FCA), as are any company selling financial products. This means they must work within the rules when claims are made against them.
Warranty insurance is most common on expensive goods which can have high maintenance costs. These will generally be motor vehicles, boilers, and household appliances. It is also possible to get them for electronic items such as computers, solar panels or televisions.
Car Warranty Insurance
Almost all new cars come with some manufacturer’s warranty – it’s nearly impossible to find one without. This warranty will usually last for somewhere between thee and seven years and will cover you for different things as specified in the paperwork.
Some will include things such as break down cover, recovery and accidental damages. Other, cheaper warranty insurances might only include faults in the vehicle from the manufacturer.
When buying a second-hand car, warranties can be different. If the manufacturer’s warranty has expired, then the dealer might have an additional policy, such as a 12-month plan. You can also look for used cars which are still within their manufacturer’s warranty insurance policy.
Types of Car Warranty
There are many different types of warranty that you can have when you buy a car. These can all be found on new or used cars. Each one has a different set of pros and cons.
First is a car manufacturer warranty. These generally start when the car is first put on the roads. The warranty will cover you if anything is wrong due to the design or construction of the vehicle. It should also protect drivers if it does not live up to expectations. The manufacturer will replace, repair or reimburse you as appropriate.
Next is the insurance backed warranty. This is the typical ‘warranty insurance policy’ that is covered by an insurance company. These are generally the most secure as they are backed by the FCA and the Financial Ombudsman Service (FOS). Even if the dealership or car maker shuts down, you will still be backed, so there is an advantage there. The downside to these is that they tend to cost a little more.
Lastly, you can have a dealer-backed warranty. Also called an obligor warranty, it is given out or sold by dealerships when they sell new or used cars. This type of warranty is usually provided by a third-party associated with the dealership. While the policy might still be backed by an insurance company, your contract is with the dealer. If the dealer closes down, then your warranty with the insurer will no longer be valid.
If the warranty is organised by the dealer but isn’t backed by an insurer, it is an in-house warranty. The benefit is that the cost to you can be lower, but there are risks if the car dealer goes bust or isn’t trustworthy.
There are also ‘pot scheme’ warranties. These are where an organisation such as a community group or a car dealer takes an annual amount from each driver in the scheme. Everyone who pays in an amount of cash, and if they need to claim then their claim is taken from the same pot of cash. If there is money left at the end of the year, then most money is refunded, minus an admin fee.
Pros and Cons of Warranty Insurance
Warranty insurance provides many benefits to consumers. The main benefit of having it is the peace of mind that it offers that you will be compensated if things go wrong. Usually the cost of repairs, replacements and refunds will be covered.
These can be a tailor-made cover to suit your needs and wants, such as what repairs you expect to need. Other things such as the size of the excess, the cost per month and accident or breakdown cover can also be provided by most insurers.
What does the warranty insurance cover?
Each warranty insurance policy will cover different things. This will vary with the different companies which offer the cover for your good or product. Often your retailer or manufacturer will have agreements with some. In these cases, you can usually get better value deals than when looking at comparison sites or going direct.
For electronic goods, most repairs or replacements will be covered by the policy.
When it comes to more complex items, such as cars, there are more differences. Here are some different areas which most warranty companies will pay for repairs with their car policies:
- Engine repairs
- Transmission and alternator problems
- Fuel tank and delivery repairs
- Exhaust and catalytic converter cover
- Dashboard electrics
- Steering and tracking problems
- Clutch, brakes and accelerator repair
- Suspension services
- Gearbox repairs and cover
- Safety features such as seatbelts and airbags
Some will also cover other areas, but expect these to come at a higher cost:
- Tyre patching and replacement
- Wheel damage repairs
- Internal upholstery repairs
- Air conditioning and window repairs
- Cosmetic bodywork repairs
If these go wrong and it is the fault of the driver, then the warranty company is unlikely to cover it. If it was the fault of the manufacturer, then the warranty insurance should cover the costs of these things.
If it was the fault of another driver, then the third-party aspect of their insurance should cover you. If not, you might need to claim on motor insurance.
Warranty insurance claims
Usually, if you have a copy of the warranty certificate still, claiming on the policy will be easy to do. By contacting the warranty provider, you will be able to make a claim. If they don’t give you the reimbursement you are asking for, you might need to take this claim further with a claims management company or make a complaint.
Bear in mind that warranties usually only cover faults in the product as it was bought, and not accidental or deliberate damage. This will usually be covered by claiming on your motor insurance.
Extended warranty complaints
If you want to receive money that a warranty insurer owes you for an appliance, car, electronic good or other items, you might consider logging a complaint against them. With the help of a claims management company. We have a very high success rate in dealing with these types of claims, and while every case is unique, our team is experienced in tackling complaints when insurance companies don’t pay what consumers are owed.
Sometimes there are issues with extended warranties. If your policy was an extension of a previous one or was longer than the standard policy, the company might not have up-to-date records. It can be important to specific you have an extended warranty complaint when dealing with the insurer; this can help your claim.
Mis-sold warranty insurance
Like all other types of insurance, warranty insurance can be mis-sold to consumers. Mis-selling happens when the policy is either unsuitable for the customer, is forcefully sold or the customer was misled at the point of sale.
If the person or company selling you your warranty insurance used pushy sales tactics, you might be owed money. If you didn’t want to buy the insurance or were wanting to wait a little bit longer, but you felt like you were pushed into buying, it might be mis-sold to you. Financial services must be sold fairly, and this falls outside of the guidelines set.
If the policy was unsuitable for your needs, it might have also been mis-sold to you. If the warranty company knew that you drive a certain car or have a specific television that isn’t covered, then you bought an unsuitable policy. This is the fault of the insurer, who might owe you compensation for doing this.
Lastly, is being misled. If the salesperson or company misled you when you bought it, then you can often be owed compensation for mis-selling. This includes being told that is covered things that it did not, having fees or important details hidden from you, or being told you have to buy it.
If for any of these reasons you think you or someone you know might have been mis-sold warranty insurance, you might consider claiming the insurer. Contact our team today for advice and guidance on the best ways to claim against mis-sold insurance warranties.
How much will warranty insurance cost?
The cost of warranty insurance will vary with each policy. Sometimes an identical policy will differ significantly in cost from different providers. If the maker of what you’re insuring has an agreement with a warranty company, you might get a better deal. This can be the case for retailers such as car dealerships, too.
The value of what you’re insuring will be a significant part of the cost. If the car, appliance or electronic good is of higher value, you will likely pay a bigger lump sum for the warranty. If you bought a car on a special offer, usually the regular price will be considered.
The amount you use the good is also going to be taken into account. If you are insuring a vehicle for weekends only the warranty insurance might be cheaper than for daily use for motorway driving. Boilers used by people in large, cold houses will use it more than someone in an insulated flat. The cost of insuring goods with a warranty will increase with the amount that it is used.
The general reliability of the model and maker will also be considered. Certain television companies or vehicle manufacturers are known for making long-lasting, high-quality products. Others have reputations for low-quality products which don’t last. Buying longer-lasting products will often cause there to be a higher initial cost, but a lower warranty or guarantee cost.
If what you are getting the warranty insurance policy for is brand new from the factory you’ll likely pay a lower price. An identical model which has been used for a few months or years already will probably see a higher warranty price.
Lastly, and most importantly, is what the warranty will cover. If the warranty you want covers all eventualities, including user negligence or third-party damage, it will cost more. Having a no-questions-asked refund or replace will also drive the cost up hugely.
For some electronic goods, especially if children are going to use them, the warranty can be worthwhile.
A policy which protects you if your kids damage your items can often save you money in the long run.