We all have the fear that our primary vehicle will suddenly break and leave us stranded. There really isn’t anything we can do to prevent that catastrophe. But we can take the proper precautions to protect our transportation ahead of time.
But taking the proper precautions involves more than picking out the first extended service contract that pops up on Google. Like any industry, the extended service contract vertical has its winners and its losers. As a broker of auto warranty programs since 1989, we have seen plenty of ripoffs, and we have seen plenty of good companies help their customers succeed in the face of disaster.
The following three areas are the first places we look when evaluating an insurance provider. This is really a simple process, and it will only take you a few minutes.
#1 – BBB Ratings (Better Business Bureau) for Integrity
BBB Ratings give you a measure of how the business will treat you. They are based on complaints received from previous customers, and this is checked against any information BBB can obtain about the business. Businesses are rated on the A+ through F scale, where A+ represents the fewest number of complaints. A high rating means the insurance provider communicates its coverage effectively and then follows through on that coverage as a general rule, showing a high degree of integrity and trustworthiness.
Read more about how the BBB rates extended service contract providers here.
#2 – A.M. Best Ratings For Financial Capability
When your security is on the line, integrity is big, but it is not the only characteristic that matters. An extended service contract provider can have all the best intentions, but capability is needed too. And a company that files for bankruptcy might not pay all its obligations, so you want to choose an insurance provider that is financially stable.
A.M. Best is a global, full-service credit rating agency that is dedicated to serving the financial and health care industries. They have evaluated the credit-worthiness of businesses since 1906 and have developed a reputation for delivering independent, well-researched, unbiased opinion about a business’ financial stability.
Whether you pay for your extended service contract upfront or in monthly payments, you are essentially buying a promise to pay. A.M. Best Ratings measure the likelihood that an organization will be able to make good on that promise in the foreseeable future.
#3 – Look for Clearly Defined Contracts that Identify Insurance Backing
OK, so now you know how to appraise the insurance provider, but now you need to appraise individual plans. If a provider has a stellar BBB rating, 999 times out of 1,000,* the provider will use clear language in its policies to define the contract’s financial backing by an insurance company.
*999 out of 1,000 is a means of expression and does not represent real data. 😉
The policy should have language similar to: “THIS CONTRACT IS INSURED—Our obligations under this contract are guaranteed by an insurance policy issued by (insurance company name, address and policy number). You may file a claim directly with the insurance company. Please call (telephone number) for instructions.” Never purchase a car extended warranty that lacks insurance reinforcement.