What is Warranty Insurance?

Mary McMahon
Mary McMahon

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.

Product warranty protection coverage guarantees the product to be free of any flaws in workmanship and materials used.
Product warranty protection coverage guarantees the product to be free of any flaws in workmanship and materials used.

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.

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.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments


@Feryll - Those extended car warranties can be good or they can be a waste of money. That's the bottom line. The companies offering the warranties are not doing so out of the goodness of their hearts. They are trying to make money off of you, and they are taking a calculated risk that they won't have to pay you more than you pay them.

If you plan to keep your car 10 more years then you might save a little money or break even, but I imagine the premiums are not cheap. However, I bet most people who get the warranties end up getting a new car before they have a chance to use the warranties.


@Feryll - I have seen the TV commercials about the extended auto warranty insurance. The announcer always says something like how would you feel if you had to spend $5000 to replace your motor or $7000 to replace a transmission? Personally, I would feel like an idiot because I am not going to pay that much for any one part on my car. I would simply trade the car in on another one or sell it at the junk yard.

Those ads greatly exaggerate the amount of money you will have to pay for car repairs.


For the last year or so I have been receiving these letters in the mail offering me extended warranty on my car. I have a SUV and it is 10 years old. I had not heard that a person could buy extended auto warranty until I began getting the offers in the mail. I always thought once the manufacturer's warranty ran out the car owner was on his own.

I have not had to make any major repairs to my vehicle, so I am thinking that the insurance might be worthwhile with a car as old as mine is right now. A transmission or a motor can go bad at any time from this point on and those are expensive replacements or repairs.

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