Vehicle Service Contracts, commonly called extended car warranties, can have your back by covering your repair bill when an unexpected mechanical breakdown comes up.
In whatever situation you’re currently in—whether your manufacturer’s warranty is close to expiring or you’re thinking about getting a used car extended car warranty plan—you’ll repeatedly run across certain words when shopping around. Knowing what the common terminology associated with extended car warranties mean can assist you while deciding on the coverage that’s right for you (as they can often be very confusing).
Here we’d like to guide you through the most common words used while describing extended car warranty coverage to help you through your buying process.
A-Rated Insurance Company: An independent rating by AM Best credit agency that measures an insurer’s ability to meet its financial obligations to their policyholders. An A-rating is “Excellent”, which means the company has excellent financial strength to pay.
Activation: A set of actions (for example, taking a picture of the vehicle’s VIN number or odometer) required from the service contract holder to send to the provider so that coverage can take effect. The actions may differ depending on the type of coverage the warranty holder signs up for.
Administrator:A partner company that authorizes and pays the repair facility or repair shop for repairs on a vehicle.
Authorization: An approval issued by the administrator on a claim so that repairs and/or replacements can begin.
Auto Warranty: A contract between the owner of the vehicle and the vehicle’s manufacturer or third party to provide vehicle repair coverage. See Extended Car Warranty
Note: Although the term “warranty” is meant to be used only when referring to coverage provided by a manufacturer, it’s a term that’s widely used for both vehicle manufacturers or third parties.
Make and model: A vehicle’s make is the brand of the vehicle (for example, Chevrolet, Ford or Toyota). A vehicle’s model is the name of the specific car product (for example, a Chevrolet Corvette).
Manufacturer’s Warranty: A contract between the owner of the recently purchased vehicle and the vehicle’s manufacturer. The manufacturer promises to repair or replace essential vehicle components affected by factory defects for a certain period of time, usually 3 years or 36,000 miles.
Mechanical Breakdown Insurance (MBI): A type of extended car warranty or vehicle service contract that covers vehicle repairs or replacements due to a mechanical breakdown. It differs in that it’s considered an insurance product and it’s only available for California residents.
Powertrain: The vehicle components that work together to move a vehicle’s wheels. It includes the engine, transmission, the differentials, the axles, wheels, CV joints and driveshaft.
Powertrain Warranty: A type of warranty that only includes repairs or replacements on the car’s powertrain (engine, transmission, the driveshaft, differentials and axles).
Product: The specific type of extended car warranty or vehicle service contract the warranty holder has purchased (for example, Vehicle Repair Protection, Key & Fob Replacement or Tire & Wheel Protection).
Repair Facility/Shop: A licensed mechanic shop in the United States. This includes the dealership, national (chain) repair shops or a local mechanic.
Road Hazard: A foreign object that’s unintentionally driven over on the road or highway (for example, nails, glass and potholes).
Roadside Assistance: A set of various services that can help a driver in case of a mechanical breakdown on the side of the road, parking lot, at work or at home.
Routine Maintenance: A vehicle maintenance task performed on an ongoing basis to check for, and prevent, mechanical issues before they end up becoming more complicated (for example, oil and filter changes, tire pressure checks, shock and strut inspections).
Vehicle Identification Number (VIN): The identification code for a specific vehicle. It’s considered a” fingerprint” because no two vehicles have the same VIN number. It’s composed of 17 characters that include numbers and capital letters. It’s located where the dashboard meets the edge of the windshield, on the driver’s side.
Vehicle Service Contract:A contract between the owner of the vehicle and the vehicle’s manufacturer or third party to provide repair coverage for expensive, unavoidable repairs. It’s a good option for protection once the initial manufacturer’s warranty runs out. It’s commonly referred to as an extended car warranty.
Vehicle Placard: A label located on the driver’s side door, near the door jamb. It includes important vehicle information (for example, the recommended tire pressure and the vehicle load capacity).
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