Service Contract FAQs

A “service contract,” which is sometimes referred to as an extended service plan or extended warranty, gives purchasers of consumer electronics, appliances, motor vehicles, homes and home systems, the option to protect their products and investments beyond the terms provided by the manufacturer or seller.

Unlike a service contract for which a consumer pays a separate charge, a manufacturer’s warranty is included in the purchase price of a product. Service contracts are designed to provide protection after a manufacturer’s warranty expires but they can also overlap by providing additional benefits generally not included in a manufacturer’s warranty.

A typical service contract covers repair of a product or the replacement of a product with an equivalent model within a specified time period when the failure of the product is due to an inherent defect or a defect in materials or workmanship. Service contracts also often cover failure due to normal wear-and-tear.

Yes. Many retailers and other sellers offer service contracts at the time a consumer purchases a home, auto or consumer product. But there are also many after-sales providers of service contracts that allow consumers to take time to decide if he or she wants to have added protection before or after the manufacturer’s warranty expires.

Typically, a service contract can be transferred to a new owner of the product by providing the name and address of the new owner to the contract provider or administrator. Your specific contract will detail transfer eligibility and terms, as well as specify any requirements such as time considerations or transfer fees.

Some service contracts may have a deductible. Most service contracts do not. It’s important for consumers to carefully read the terms of their contracts and to fully understand what is covered and what is not.

Most laws governing service contracts require a period, which allows consumers to get a full refund if they change their mind within a specified period of time. After the period, service contracts typically provide a consumer with the right to cancel at any time during the life of the contract.

Consumers can typically initiate claims easily and quickly by calling a toll-free phone number. Claims and repairs may be handled or authorized by the manufacturer, retailer, dealer, an independent company or others.

Consumer needs vary, however, it is important for consumers to consider the implications of a product failure and their options should that happen. Key considerations, for instance, might include the logistics of arranging quality repair service on short notice, the need to find a temporary replacement product during what can be extended repair downtime, the cost of the actual repair, any potential cost of the temporary replacement and the cost to completely replace the product if it cannot be repaired.

Service contracts enhance the value of products and help the consumer immediately deal with a malfunction and/or the resulting loss of usage. When a product fails, a consumer can typically call a toll-free number and the service contract protection activates immediately.

Absolutely. Consumers use their service contracts regularly for not just the obvious — repairs and malfunctions, but for technical assistance as well. Many “one-time users” become “repeat users.” Once you experience the ease of replacing a product “on the spot” rather than waiting six weeks for it to be repaired, or avoid a costly and unexpected repair bill, it’s hard to go back.

When a vehicle covered by a service contract needs to be repaired or serviced, a consumer may be able to choose among several service dealers or authorized repair centers. In some cases, the consumer must return the vehicle to the selling dealer for service.

Consumers should read and understand the terms of their auto service contract thoroughly. Many service contracts require a consumer to adhere to all of the manufacturer’s recommendations for routine maintenance, such as oil and spark plug changes. Failure to do so could void the contract. It is important for the consumer to keep detailed records, including receipts, to prove that the vehicle was properly maintained.

Approximately 37 states have enacted specific laws governing motor vehicle service contracts. Many service contracts are backed by A+ rated insurers, who provide additional financial solvency on long-term contracts. Consumers can typically find the name and contact information of any insurer backing their particular program on their service contract. In many states, service contracts come with a period, usually 30 days, during which a consumer can return the contract for a full refund. Service contracts also can be cancelled mid-term.

Service Contracts for the home help homeowners protect their largest investment by providing a flexible array of services. Home Service Contracts can cover defects in major structural components of your home and/or the major systems of the home, such as the electrical, plumbing, heating or air conditioning systems. Some home Service Contracts also provide for service or repair due to normal wear and tear. You should always review the details of your contract to know exactly what is and is not covered. Having a home Service Contract can provide easy access to a network of pre-qualified service providers and repair professionals, such as plumbers, electricians and HVAC specialists who can be reached with ease by calling one convenient toll-free number. As a result, home Service Contracts are often a welcome relief to new and veteran homeowners alike.

Service Contracts help homeowners budget for routine maintenance and avoid unexpected, sometimes large repair and service bills, as well as inconvenient, unpleasant and sometime dangerous downtime that can result when a home’s systems malfunction. Home Service Contracts also often cover a home’s major appliances. Keeping you “in business” in your basement workshop, kitchen or laundry room! Over time, a home Service Contract can enhance property value and provide incentives for homebuyers by offering additional value.

Service contracts for the home are sold by realtors, builders and independent providers. They can be purchased at the time of sale and are typically transferable to a new owner. Yes, service contract are not just available for new homes. Service contracts are available on homes that have been around for several years, and often provide an added advantage to the seller of the home and peace of mind to any prospective buyer.