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   Extended Warranty Insurance

Extended Warranty Insurance

We rely on appliances and machinery, from products like hoovers and toasters to complex items like cars, computers and televisions. We often take them for granted, that is until they go wrong! Sometimes, a breakdown is just a nuisance, but it can be a disaster, causing you great trouble and sometimes considerable expense. The effect of a failure will depend on your circumstances. For an example, a car breakdown can have very serious consequences for your planned travel and breakdown of your washing machine can cause extra work. But breakdown of an iron is a minor inconvenience.

When you purchase something new, the current law requires it to be up to the job you will ask of it (Sale & Supply of Goods Act). The manufacturer or retailer of the product guarantees it for a period of time, this is generally a year at least and in some cases longer. Manufacturers usually provide longer-term guarantees on parts, but not their labour costs. You should make sure you know what guarantee is provided free when you purchase and what is covered. You can expect to have several years' service from a car or household appliance, but faults sometimes develop even in the best equipment and from the best manufacturers. When things go wrong after the guarantee period, you will have to arrange for the repair yourself and pay for it, or buy a replacement.

Insurance companies have developed policies designed to protect you from the cost of these breakdowns. These extra policies are known either as warranty insurances or as mechanical breakdown insurances or just breakdown insurances and these are available from a number of regular insurance companies.

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Motor Vehicles and Private Cars


Insurance Policies Available

There is a wide range of mechanical breakdown policies available that are designed to protect you against the costs of sudden failure of specified components. The components that are covered may vary according to the age and mileage of the car. This ranges from insurance policies that provide wide protection on new used vehicles through to more limited covers for older or high mileage vehicles. You may even be offered the choice of cover for the vehicle you are buying. Normally if you choose the policy which covers a wide range of components, it will be more expensive than one with a restricted list.

Insurance Cover

These insurance policies normally pay for parts and labour charges incurred in the repair or replacement of an insured component following its failure. Cover usually applies strictly to the failure of specified components only; if the component is not listed for cover in the insurance policy, the claim will not be paid out.

Insurance policies will quite often have a maximum amount payable for any claim. This may range from a few hundred pounds to a few thousand. You are advised to check these limits in view of the cost of breakdown for major components. Some insurance policies have a betterment clause which means that you would have to pay something if your car was improved following repair. They may also have a maximum amount of money payable during the life of the insurance policy. There may be an excess that you will need to pay yourself if you have to make a claim. Some of these components may have specific claim limits or excesses applied as well.

These insurance policies are not to be seen as maintenance contracts and do not cover breakdowns that arise through normal wear and tear. Some components will require replacement during the expected life of a car as part of the regular recommended servicing by the manufacturer. The insurer protects you against any unexpected failure. The insurance policy should make these points clear.

New cars are covered usually for an additional 12 or 24 months after the manufacturer's guarantee expires, but longer periods of insurance cover are available on some vehicles. Used car periods of cover offered will vary from three months to three years from purchase. Policies can include a mileage limit and cover will be discontinued if this mileage is exceeded while the insurance policy is in force, so you need to consider very carefully whether this limit will be enough for your expected use of the car.

Mechanical Breakdown Insurance - Additional Benefits

Mechanical breakdown insurance policies can also include additional benefits, such as towing-in charges or a contribution to the cost of a replacement car during these repairs. These benefits only usually apply in conjunction with a valid mechanical breakdown claim and can be subject to separate conditions and limits. In some cases the policy claim limits will include payments made under the additional benefits section of the insurance policy.

Servicing and Conditions

Insurance policies require you to comply with their conditions and if you don’t comply the claims may be refused. Mechanical breakdown policies normally require the car to be serviced by an authorised dealer, at special intervals laid down in the insurance policy. The insurance policy holder is totally responsible for making sure that correct servicing on the car is carried out at the intervals specified by the dealer.

Obtaining Mechanical Breakdown Insurance Cover

When purchasing a new car through a dealer you will get details of the insurance policies that they offer. Insurance cover may also be available from the car manufacturer. For a used car, the insurance cover available will depend on the age and mileage. Insurance cover is also available from some insurance companies, motoring organisations, brokers, banks or financial institutions. A few mechanical breakdown insurances have an option to renew the cover for twelve months when your policy runs out.

How to Claim on Your Insurance

The insurance policy will include a detailed claims procedure that must be followed correctly. Do not authorise any repairs to your car until you have checked the procedure. Most insurance policies will require you, or the garage to contact the insurers, before any repairs start, you need authorisation to proceed. Car breakdown or warranty insurance policies are available for a wide range of other mechanical items. These can be office machinery, boats, diggers, kitchens and furniture are all examples where policies are usually available. The principles of cover are similar to those provided for household appliances and cars, but the insurance policies may have different conditions.

Insurance Codes of Practice

There are three Codes of Practice:

  • the "Guidance Notes on the General Business Code of Practice"
  • the British Retail Consortium Code of Practice for extended warranties on electrical goods
  • the Society of Motor Manufacturers and Traders' Code of Practice for mechanical breakdown insurance schemes which both cover a range of matters including insurance

Other Insurance Information

Insurance policies are very important documents. You must read your policy carefully as soon as you receive it. If you do not understand anything then you should ask the person who sold you the policy to explain. You may wish to check that the insurer is a member of the Insurance Ombudsman Bureau or the Personal Insurance Arbitration Service. These insurance bodies can help you if you have a dispute about your insurance that you cannot resolve. Your insurance policy will have details of this procedure.


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