This page reflects topics, terms, and videos related to Service Contract, Limited Warranty and Reimbursement Insurance.

What is a Limited Warranty?
  • Magnuson Moss is the governing law for (OEM) manufacturer or product seller warranties
  • Provided at no cost to a consumer by the (OEM) manufacturer or product seller
  • Provided to all purchasers

What is a the Magnuson-Moss Warranty Act?
The Magnuson-Moss Warranty Act is the federal law that governs consumer product warranties. The Act doesn't require a manufacturer or product seller to provide a warranty. However, it does define what is required if a manufacturer or product seller does offer one.

The Magnuson-Moss Warranty Act requires manufacturers and product sellers of consumer products to provide the consumer with clear and detailed information regarding the warranty coverage. It directly impacts the rights of the consumer and the obligations of warrantors under the written warranties.

Click here for additional information of the Magnuson-Moss Warranty Act


What is a Service Contract?
  • Most states have regulations to define a service contract
  • Typically defined as sold to a consumer
  • Provides repair or replacement or cash value for a covered item
  • Optional and sold at separate cost to a consumer
  • Service Contracts are structured based on product type, price tiers, term of coverage

What is an Extended Warranty?
  • This is technically not a valid term
  • A limited warranty is given by an OEM or product seller
  • A service contract is an optionally sold product


What is a Warranty Company?
A Warranty Company may take several forms related to Service Contracts and Limited Warranties. A Warranty Company may offer claims administration and repair logistics services, registered provider (obligor) services, underwriting services, product development services, training services and insurance brokerage services.

Warranty companies provide support for warranty programs for OEM Manufacturers, Dealers, Retailers, VARs, Marketers and other channels of distribution.

Sellers of Service Contracts may retain the program in-house, subject to regulatory and compliance requirements, or they may utilize a third-party warranty company for state level compliance and/or a third-party administrator for customer care.
Each program can be custom designed to achieve the client objectives. You do not have to use a third-party administrator to use a third-party obligor or to obtain reimbursement insurance for example.

  • An obligor is the legal entity responsible for performing under a service contract
  • An obligor may also be referred to as a provider
  • A claims administrator may be part of a warranty company or may be a separate company


Role of a Warranty Company and an Insurance Company?
  • Service contracts use insurance as a financial backing
  • Limited warranties can be backed by an insurance company
  • Warranty administrator or a third-party administrator can perform claims administration services for a warranty or insurance company

Unique Service Contract and Warranty Product Features
  • Parts and labor repair
  • Product replacement
  • Accidental damage
  • Food loss
  • Power surge
  • Roadside assistance
  • Loss and theft coverages are not service contracts, they are insurance products

How are Warranty and Service Contract Programs Developed?
  • Analysis and projection of Frequency of claims
  • Analysis and projection of Severity of claims
  • Retention period or amount utilized


What OEM Warranty Structure Options Exist?
An OEM Limited Warranty is provided to a consumer at no cost. An OEM may decide to transfer a portion of the limited warranty risk directly to a third-party. In this case it is an insurance transaction and should be done directly with a carrier.

  • An OEM may retain the warranty risk internally
  • An OEM may outsource some or all warranty risk to an insurance carrier
  • An OEM may perform warranty claims management internally
  • An OEM may utilize a third-party administrator for some or all warranty claims management

What is the Size of the Service Contract industry in the US?
  • Multiple segments exist
  • Four (4) primary segments are automotive, consumer products, mobile and home
  • Total in excess of $61b at retail

Click to view a brief presentation reviewing 2020 Service Contract projected size and scope.

UPDATE - The shutdown driven by the Covid-19 Virus will greatly impact every category in 2020. This should be viewed as a run rate prior to the shutdown.

What is a Service Contract Reimbursement Insurance Policy?
Click to view a brief presentation outlining Service Contract Reimbursement Insurance for a Service Contract Company.

What is Product Warranty Insurance?
  • Transfer limited warranty risk
  • Using a Contractual Liability Insurance Policy CLIP
  • Claims administration options

Click to view a brief presentation outlining Product Warranty Insurance for OEM's and Product Sellers.