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January 29, 2006
Buyer, Beware of Fly-By-Night Service Contract Companies
We got an e-mail from Ken, a reader/listener asking us to warn others against the financial setback he just encountered -- the company he had a service contract with went belly up, and he is now out the susbstantial investment, and doesn't have the coverage he wanted to carry for his vehicle.
The company, Primeguard Insurance, operated and sold policies under the name 1Source Auto Warranty, and it has since been ordered to cease operations. You can read coverage here and here.
Primeguard also operated under the names First Assured Warranty Corporation and WarranteeWise, Inc.
The purpose of this story is twofold -- first, if you're the holder of a policy from any of these entities, check to see if they're still answerinng the phones. If not, you may want to file a claim, but as our reader pointed out, the chance of getting any money back may be very slim.
Second, we would like to use this situation to warn everyone against buying extended service contracts from any company that even smells a little funky. In this case, and for this product, it's best to go with a known name.
For this reason, many people feel most comfortable getting an extended warranty from the manufacturer -- even if it does cost more, the chances they are going to default on the policy are slim.
We have had the pleasure of visiting the offices of CNA Warranty, a national operation with long-standing [and serious money behind htem]. We actually listened in on claims calls and were impressed by the knowledge of the CNA staff, and the way they paid claims.
Finally, as we pointed out in this previous story, auto insurance giant Geico offers an extended service contract that is affordable, and can even be paid in intallments. Called Mechanical Breakdown Insurance, Geico's plan only costs $210 for the whole policy, and it can be paid in installments.
Now all this being said, not all extended service contracts, or even original warranties, are created alike. Even if your policy carrier stays in business, there are plenty of examples out there of seemingly reasonable claims going unpaid.
We'd also like to thank Ken for writing in with this information, for at a time when he has to deal with his own setback, looking out for others is admirable.
Posted by Frank at January 29, 2006 4:09 PM | Filed under Auto News
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