We as consumers do not pre-pay for 60 months of our automobile insurance or health insurance, why would you pre-pay for your mechanical breakdown insurance?
Ferndale, WA (PRWEB) October 21, 2009
Savvy consumers are beginning to realize that an auto warranty , auto service contract and extended warranty purchased for a used car or truck, pre-paid through 12-, 18- or even 24-month interest free financing is an opportunity to be left exposed to the administrator's or selling agent's insolvency or bankruptcy, like one reported on the Consumerist Web site early this month. One company, Service Protection Advisors , is addressing this consumer concern with a new program that allows consumers to purchase these contracts over a period of time up to the entire term of the contract.
With a typical warranty program, any time a consumer purchases a contract, also known as an extended warranty , with payment terms that are less than the coverage term of the contract they are effectively pre-paying for these contracts. For example, if a consumer were to purchase a car warranty at a price of $3,000 that had a coverage period of 60 months yet finance the purchase of the contract for a period of 12 months interest free, the consumer would pay $250 per month for that 12 month period. Yet, the consumer's actual monthly cost for the coverage is only $50 per month (assuming equal time and mileage of use). Therefore, the consumer is pre-paying for a coverage that is not yet earned by the insurer, administrator or the selling agent. Said another way, those organizations are collecting the money before they have actually earned it!
In this situation, the consumer still retains coverage for a period of 60 months assuming the administrator remains solvent. Generally, the purchaser of the vehicle service contract is entitled a prorated refund at any time based on time or miles, whichever is more, less cancellation fees that may apply. However, in order to receive these refunds due in full, both the administrator (and its reinsurer if one exists) and the selling agent must still be solvent and actually provide the refunds as agreed. In fact, those sellers that remain solvent still must have business policies and practices that willingly provide these refunds without government action. Several of these companies in the St. Louis, MO, area have had that type of government action brought against them. When savvy consumers avoid pre-paying for these policies they avoid being reliant on the sellers to provide these refunds.
The new month-to-month programs, also called leases, now being offered by Service Protection Advisors allow the consumers not only to lower the month payment dramatically, but nearly eliminate the exposure to an insolvency of the companies providing and selling the coverage.
"We felt the best way to provide auto service coverage to any consumer is to allow them to pay as the premiums are earned rather than paying in advance for the coverage." says Jeff Birmes, President of Service Protection Advisors. "We as consumers do not pre-pay for 60 months of our automobile insurance or health insurance, why would you pre-pay for your mechanical breakdown insurance?" This is why Service Protection Advisors has developed these month-to-month programs, as they are more typical to the way consumers purchase their automobile or health insurance. If the consumer no longer wishes to have the coverage, they simply stop paying and are not reliant on the seller for a refund from pre-paying for the extended warranties. In addition, unlike automobile and health insurance -- which are generally year-to-year, allowing premiums to increase for a multitude of reasons from cost of doing business to claims made -- Service Protection Advisors' program locks in the premium rates for the term of the contract, which can range from 24 to 72 months. This is a huge advantage for consumers to fix the cost of coverage for many years outward.
For more information about the new auto warranty and extended warranty program from Service Protection Advisors, visit http://serviceprotectionadvisors.com/.
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