Frequently Asked Questions

Insurance & Non-Insurance - What is the Difference?

Car dealers and third party companies sell or sometimes give away warranties or guarantees.

The terms are often assumed to mean the same thing, but there seem to be three types of warranty permitted under English Law at present:

1) An Insurance Warranty which is underwritten by an insurance company and is an agreement that the insurance company will indemnify the policyholder against loss caused by a covered part in specific circumstances.

2) An Obligor Warranty or Guarantee which is a contractual warranty between the seller (usually a garage) and their customers to guarantee the quality of the goods being sold for a certain period.

3) Discretionary warranties which are products that rely on the supplier using their discretion to help the consumer resolve the problems with a product rather than being limited to very specific terms and conditions. These products therefore have more flexibility than insurance products in terms of what will, and won't be covered on a case-by-case basis.

While all are called a warranty and sold or given away in the same ways, there are big differences.

The discretionary, obligor and guarantee products should be cheaper to buy and are more often given away by car dealers, but they do not offer the same level of long-term protection as insured warranties.

These warranties come under the jurisdiction of the Office of Fair Trading, not the Financial Services Authority (FSA) so if you are not happy with the service you receive you would need to take legal action against the seller and or administrator. 

The FSA say this about guarantees and warranties:

"Some firms, such as car dealerships, offer their own warranties to cover repairs or mechanical faults as part of the sale of the goods. This includes car dealers who offer additional warranties to extend manufacturers’ guarantees on new cars, or mechanical guarantees on used vehicles. We have concluded that contracts of this kind are unlikely to be insurance. This is because the warranty is a consequence of the contract of sale, under which the substance of the provider’s obligation is the sale of goods that meet the required (often statutory) quality standard, not the provision of insurance. In this situation, the warranty does not involve a transfer of risk, but a recognition (and crystallisation) of an existing responsibility." Source: FSA

If you buy an insurance warranty, then it will be regulated by the FSA, which means that if you are not happy you can complain to the Financial Ombudsman and if the insurer cannot pay out you will be covered by the Financial Services Compensation Scheme.

So if you are buying a long-term product (several years) then an insurance policy may make more sense. If you are buying a short-term warranty, or given a 3-6 month warranty to cover the period just after you buy a new car, then the discretionary, obligor or guarantee products will probably offer sufficient protection.

What if a Provider Refuses to Pay for a Claim?

If a company refuses to pay you for what you believe is a legitimate claim, take these steps:

• Take you policy documents to the garage that has your car
• Have a garage provide a letter summarising their assessment of the problem using the same technical language as the policy documents
• Send this to the company, with a letter explaining how the garage's views is that the claim matches the terms of the warranty
• If the garage opinion and terms of the warranty clearly show you should be paid, then the company should pay
• Tell them you will take them to the small claims court if they don't pay

See the next point 'I am in dispute' to find out more on how to do this.

Dispute with my Provider

If a company won't pay out on your claim, and you think they should, follow these steps:

• Put your complaint in writing.
  
• Try to include a letter from the Garage supporting your claim that the problem is caused by an insured part.
• Send copies of the relevant part of your policy.
• Write "complaint" at the top of your letter. And make sure you include important details like your customer number or your policy or account number.
• Keep things brief and to the point. Set out the facts clearly and in a logical order. Say why you're not happy and what you want the business to do about it. This will make it easier for them to look into the problem and sort things out.
• Keep a copy of any letters between you and the business. You may need to refer to them later.

Ultimately, if the company is not prepared to back down and you believe you are right, or if you are not sure of your rights, contact the Financial Services Ombudsman (for insurance warranties):

• Consumer helpline on 0300 123 9 123
  (8am to 6pm, Monday to Friday)
  They'll be happy to phone you back, if you're worried about the cost of calling us.
• Email complaint.info@financial-ombudsman.org.uk
  They will usually be able to deal with phone queries on the spot - so phoning might be quicker than emailing.

Getting the Best Value

There are 3 key things that will help you get good value from your warranty:

1. Buy the best level of cover that you can afford
2. Put your policy documents in the car and  make sure you and the garage consult them whenever you take the car in for a service or MOT.
3. Keep the policy for as long as possible - it's obvious really, but statistically, if you hold a policy for more than 3 years you are more likely to need to claim and more likely to get paid back more than you have

Should I Buy A Policy?

A used car warranty provides peace of mind and protects the second largest asset you are likely to own from being made worthless overnight.

While certain smaller components are never covered, all the major surprise bills will be covered by good independent cover.

While none of the companies have a perfect record on paying out, most pay out more often than they don't and we can help you make sure you get treated fairly by your car provider.

If your car is worth a sum of money that is significant to you, then having protection to ensure a major failure doesn't render it too expensive to repair is sensible.

The key clauses to look for are:

Does it cover you for failure caused by wear?
This means if a covered part fails and the failure is as a result of wear you are covered. AVOID policies which only cover premature wear or charge extra for wear or dont cover wear at all.

Does it cover failure of parts as a result of overheating?
Overheating claims account for a large proportion of all claims and cause big bills - you need cover on your cylinder head and cooling system.

Does it cover failure found at a service or MOT?
Your car is up on a ramp 2 or 3 times every year and this is when a garage will find problems on your car. Make sure you have this valuable cover.

Does it cover failure caused by non insured parts?
An example of this is an alternator belt braking and getting caught in the timing belt causing engine failure and a very big bill.

Does it cover your suspension?
Shock absorbers and springs fail regularly causing regular car repair bills.

Visit our comparison table to see who covers all these.

 

How Do I Know Which Provider is Best for Me?

It is very hard to provide full car warranty reviews because the policy documents and marketing materials from all the independent  providers and car manufacturers vary enormously. It can feel like you are comparing oranges with lemons.

So we have created a comparison table that categorises the key elements of cover you need to be considering.

We also publish the marketing materials and summaries for most of the warranties on the market so that you can use these to help you check the policies you are interested in and make your decision.

As you read you can see which ones offer most - if a company doesn't offer a certain benefit or is cagey about what parts they cover, then you have to question if they are going to pay you when you make a claim.

Our advice when reviewing the terms and conditions is to buy the best cover from the company that ‘speaks most clearly.'

You need to be careful about how much weight you give to car reviews on forums. Most of the people who are motivated to post reviews on a forum are angry because their claim has not been paid. What you don't know is if they breached the terms of the warranty, such as not getting the car serviced.

If we discover that companies are not being fair and reasonable about paying their claims, we will review whether to take them off this website. Please contact us if you have had a problem with your provider.