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The Language of Extended Warranty Products

In effect an extended warranty is a service contract. This is a contract between the extended warranty company and the vehicle owner. For instance if you purchase a Ford specific extended warranty, this is in effect for repairs to your Ford. Extended warranties provide a form of insurance but are not in fact insurance policies.

The money that you use to purchase an extended warranty is used to fund the “claims reserve account”, this claims reserve account has to be insured to make sure that there is always sufficient funds in it to pay for the repairs to the vehicle of warranty owners. The fact that the claims reserve account is insured and re-insured is what tells the warranty owner that he is in fact in possession of a good product.

Extended warranties are precisely what they say they are, they extend the car manufacturer’s warranty beyond its expiry date. You do not receive double cover. The sooner you purchase an extended warranty, the less you will pay for it. Trying to purchase an extended warranty after the expiration of the manufacturers guarantee will mean that it will be more expensive.

The Warranty Administrator is the company that provides the extended warranty product. It is highly recommended that you purchase your warranty from these companies directly. As long as the claims reserve account is in good standing and insured, you should have no problem with this kind of purchase.

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