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What Is Warranty Insurance?

Product warranty protection coverage guarantees the product to be free of any flaws in workmanship and materials used.
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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
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  • Last Modified Date: 28 September 2014
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Warranty insurance is an insurance product designed to provide coverage for expenses associated with repair or replacement of the items covered by the insurance. It is sold for things like appliances, vehicles, and electronics as an extra assurance for consumers. A number of insurance companies offer this product, and it is also sometimes available from manufacturers, often with a discount when people buy the warranty insurance at the time they make a new product purchase.

Under warranty insurance, if the product is damaged or stops working properly, it can be replaced or repaired, depending on the situation, and the insurance will pay for it. People may need to pay up front and then apply for reimbursement, or the insurance company may cover the repairs directly, usually requiring people to work through authorized repair shops. In the case of warranty insurance provided by a manufacturer, the manufacturer often handles the servicing in a repair center it operates.

Typically, there are exclusions structured into a warranty insurance policy. If people use the item negligently, they cannot receive coverage. Likewise for certain types of damage, such as damage caused by natural disasters, unless special coverage has been purchased. With some products, attempts at self-repair will also void the insurance policy, and usually special seals are designed to make tampering evident to technicians when they work on the product.

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Depending on the product, warranty insurance can be a sound financial decision, or it can be a waste of money. It is important to get quotes from multiple sources to get an idea of the costs involved and to see what is covered. When weighing the purchase of warranty insurance, people may want to consider the free warranty usually offered with the product; it may be sufficient to cover their needs. If an extended warranty is desired, it's advisable to think about whether it would be more cost effective to pay out of pocket for replacement than it would be to make the insurance payments.

In the case of warranty insurance offered by manufacturers and dealers, consumers sometimes feel pressured to buy the product. When researching a major purchase, it can be a good idea to look at the warranty options, in order to be armed with that information in conversations with a salesperson. If a better insurance product is available from another source, consumers can ask about competitive rates, or indicate firmly that they are not interested in the salesperson's product.

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