Buying Extended Warranty Insurance -Is It Worth It?
We explain the pros and cons of investing in extended warranty insurance for your car.
Buying a new or used car is a major investment and one of the main reasons Extended Warranty Insurance is available. It may protect your valuable asset in the event of a mechanical breakdown. The reality is, things do go wrong as cars age and clock up kilometres.
All new cars come with a factory warranty that covers the vehicle between three and seven years. The warranty length depends on the brand. Most new cars have a three-year warranty. Extended Warranty Insurance is designed to add extra protection to the manufacturer's warranty.
WHAT IS AN EXTENDED WARRANTY?
Extended Warranty Insurance is an insurance policy that provides protection against unexpected mechanical and/or electrical breakdown. In our view, it is a sound investment however not all policies are equal and not all insurance providers are equal. Therefore it is important to look at the fine print of the policy to understand what is covered and what is not. Some offer “listed components” cover whilst others offer an “Extension to the Manufacturer’s Warranty”. "Component warranty cover" is under scrutiny at the moment and we have not and do not recommend this form of cover.
Extended Warranty Insurance is available to purchase at the time of buying a new car and right up to one month prior to the new car warranty finishing. Extended Warranty Insurance provides the extra security that if you break down the repairs, towing and in some cases accommodation is included. Without you having to pay the total cost. To have this peace of mind is very valuable however it is difficult to put a price on it. Ultimately the decision needs to be made based on facts. To help you decided there are a number of key questions to ask.
We believe the value of Extended Warranty Insurance is found in what isincluded and what is notincluded. In other words, the devil is in the detail!
Listed below are the most important questions that are relevant to understanding the detail.
What Make and Model is your car? Does it have any known problems you are aware of? If you are not sure it is worth doing a quick google search to find out. Alternatively, ask us. Use this information to determine if the coverage is enough. Check the policy covers wear and tear and mechanical breakdown also parts and labour.
Look carefully at what is on the exclusion list. Ask your mechanic or an expert if your car has a particular mechanical problem? Does the policy cover it?
In addition, understand what is required by the policyholder to ensure coverage is maintained. An example would be the car must be serviced/repaired at the insurer's nominated workshop, not your repairer of choice. Take it anywhere else and there is no coverage.
As a rule of thumb, a policy with a large exclusion list is not a policy we would recommend. Therefore we believe the exclusion list is one of the most important questions to ask.
3. Policy Excess
What is the policy excess? A policy that has no excess is the best. However, this usually would mean a higher premium. A minimal capped excess would be the next best choice. Check the fine print.
4. Number of Claims
Unlimited claims are ideal. This is not the case with all policies and we recommend choosing a policy that provides this.
5. Customisation of Policy
Some policies won't allow any changes but those that do we consider to be valuable depending on your vehicle and circumstances.
6. Level of cover
There are different levels of cover available.Choose a level that matches your personal circumstances, the value of the car and likely foreseeable mechanical/electrical issues.
7. Use of preferred repairer
Can you choose the workshop to repair the car if it breaks down? We consider a policy that allows you to use your preferred repairer or choose from a number of repairers to be superior.
8. Transfer Policy Cover
Being able to transfer the cover if you sell the car is a great advantage. It will add increased value to the car sale price if you wish to sell before the end of the warranty period.
9. Insurance Companies Reputation
Deal with a company that has a good reputation built over many years. You want to know that if you need to claim the company will be there for you. You also want the process to be easy and fast. Finally, check their on-line rating to see what other customers thought about their experience of making a claim. Customers today are very happy to describe positively or negatively what worked and didn't.
Based on personal experience we believe Extended Warranty Insurance is a worthwhile investment for your car. However, the right policy choice is important. In life, many things are not created equally. This is true of Extended Warranty Insurance.
Therefore you need to understand what the policy includes and what is an exclusion on the policy. We believe a policy should include as a minimum unlimited claims, cover for parts and labour Australia wide, is transferable, has a simple quick claims process, provides roadside assistance and is provided by a reputable company.
To learn more about Extended Warranty Insurance and if it is right for you, contact our Business Manager who can talk you through the pros and cons. Simply enter your details below and we will be in contact soon.