RV Extended Warranties
Extended warranties of any kind are not well thought of and, often, that's for good reason. Stories abound about warranty companies not paying claims and seemingly going out of their way not to pay.
In addition, they are often expensive and when they don't provide the expected coverage, frustration levels shoot through the roof.
In general, I'm not a big fan of extended warranties, but they can have value if we understand their purpose, we have the right expectations, and we don't have to pay too much.
We've had very good experiences with the extended warranties on our fifth wheel, and we've been kicking ourselves for not having one on our truck when we lost the engine back in 2012. For the right price and coverage, they can make a lot of sense on RVs, cars, trucks, SUVs, boats, motorcycles, ATVs, snowmobiles, and personal watercraft.
So we're going to explore the pros and cons and try to provide tips on how to get the most out of an extended warranty.
Extended Warranty Basics
The Merriam-Webster Dictionary defines a "warranty" as:
"a usually written guarantee of the integrity of a product and of the maker's responsibility for the repair or replacement of defective parts".
That's a fairly standard definition and implies a "warranty" is something issued by the manufacturer of a product AND it is included in the price of the product.
What we are talking about here are technically "service contracts". The purpose is basically the same as a warranty, but it may or may not be issued by the manufacturer, it provides coverage for an extended period beyond the manufacturer's warranty, and, of course, there is an additional fee or "premium".
However, for our purposes here, we will use the terms "extended warranty" and "extended service contract" interchangeably.
The Players Involved
In the "extended service contract" business, it's important to know who's who in the process.
Buyer - This is you, the purchaser of the extended service contract.
Contract Provider/Seller - The company that completes the extended service contract application and is responsible for calculating the contract quote and collecting the fee from the Buyer. This could be a manufacturer, a dealer, or an independent warranty provider.
Administrator - The company that actually pays the claims and makes the final decision on what is covered and not covered under the contract. The Administrator usually works directly with the Repair Facility. The Administator takes the largest portion of the "premium" (or fee) and places it in a "claims reserve account" to pay future claims.
Insurance Company - The company that is financially responsible for making sure claims get paid even if the Administrator were to become insolvent. It's important to ensure the financial status of the insurance company backing the "claims reserve account" is solid.
Note: In most states, extended service contracts are not treated as insurance and therefore they are not regulated by state insurance commissioners. However, the best plans are backed by insurance companies as a "specialty" line in their overall business. Be cautious of plans backed by "Risk Retention Groups" rather than regulated insurance companies.
Service Repair Facility - This is the company (i.e. RV dealer, RV service center, mobile RV tech, etc.) where you have repairs completed. The Repair Facility submits a repair plan and estimated costs to the Administrator for pre-authorization.
RV Extended Warranty Pros & Cons
Again, I'm just like most people when it comes to extended warranties or service contracts. I'm skeptical and I hate paying for a new product and then paying an additional fee with expectations that my new toy, whatever it is, is probably going to break. However, when we are talking about an RV, we're talking about something that is several thousands of dollars and a single repair can have a devastating effect on the bank account.
RV manufacturing is quite unlike auto manufacturing or any other highly controlled manufacturing process. On any given day, any manufacturer can produce an RV that is substandard in one or more of many areas. It doesn't matter what type of RV or how much the RV costs, all manufacturers occasionally make mistakes.
Not only that, but the manufacturers substitute or change components all the time. The components in the same exact RV models may be different due to a shortage from one supplier, a change in component pricing, an engineering decision, etc.
So, let's look at reasons to purchase and reasons not to purchase an extended service contract for your RV.
Reasons To Purchase
Peace of Mind - Answering the following questions may help determine if "peace of mind" is a major factor for you.
Again, the RV manufacturing process is different. There is a tremendous amount of human involvement. RV factories aren't full of computer programmed robots with precise processes. And humans make mistakes.
Budget Control - We use insurance to manage the risks of major financial outlays in our lives. Extended service contracts can take on that role as far as RV repairs go. More questions for you.
An extended warranty is also somewhat of a hedge against rising prices. The warranty company will pay retail prices at the time of the repair, but the warranty Buyer can be insulated from those price increases. In other words, once you purchase a contract, the Administrator can't come to you in year three asking you for more money because prices have gone up.
Resale Value - This isn't necessarily a major reason to have an extended service contract, but it certainly provides a seller with an advantage and it provides a buyer of a used RV with some peace of mind.
Repair Experts - Though most people don't think of a warranty Adminstrator as looking out for their best interests, it is true that Administrators provide "checks and balances" that ensure repair facilities are not overcharging.
Reasons NOT To Purchase
These are reasons NOT to buy an extended service contract.
You will be disappointed and upset if you buy an extended warranty to:
- To cover regular maintenance items
- To cover pre-existing items (repairs needed before the service contract is purchased)
- To fill gaps in your RV collision and/or comprehensive insurance
- To provide roadside assistance (though extended warranties do have some roadside assistance coverage, it's not a primary part of the contract and specialized RV roadside assistance plans are much better)
- To cover rust, corrosion, or poorly maintained vehicles
Reasons You May Not Be Able To Get An Extended Warranty On A Used RV
- Your motorhome has too many miles (Most companies will write new contracts on motorhomes with mileage up to 80,000 miles, and a few may offer contracts on higher mileage)
- Your RV is too old (Most companies have age limits for coverage; Coverage may be available for RVs up to 15 years, but always inquire if your RV is over 10 years old)
Buying An RV Extended Warranty - What To Look For
When buying an extended service contract for your RV, you want value, coverage, contract protection, flexibility and convenience, and service.
Value - Often RV buyers and owners forgo extended service contracts because the cost is hard to justify. Part of the problem is they don't know where or how to shop warranties.
For starters, extended warranties can have huge built-in profits for RV dealers (and auto dealers), and the dealer finance office is often a place where an extended warranty is presented. The extended warranty can actually create more profit than the RV sale itself. Therefore, there is often pressure to buy the warranty at time of sale and pressure to include the cost in the RV financing.
You certainly don't have to buy an extended warranty from your dealer, nor do you need to be in a rush to purchase one. So, if you have decided you would like an extended warranty, shop around and you can save lots of money. The significant savings can make the warranty much more justifiable and reasonable.
Note: Keep in mind that you don't want to wait too long to buy your extended warranty. The longer you wait, the more expensive it will be. In other words, the older your RV gets, the more it will cost to get extended warranty coverage. Just like your health or life insurance gets more expensive as you age, so does an extended warranty. So shop around, but lock in the best pricing you can get as soon as you can. Also, your RV becomes another model year older on January 1 and your cost will go up, so keep that in mind and don't put off your purchase until after the first of the year if you can avoid it.
Now, having said that you can find less expensive extended warranty coverage, be cautious of going too cheap. Be very careful of unsolicited, very, very low priced warranty offers you may receive via the mail, spam email, or telemarketing.
Coverage - It is very important that you understand the coverage being offered. The contracts can be very complicated, but always try to get a copy of a sample contract so that you have plenty of time to review it before purchase.
Types of coverage
Exclusionary Contract - An exclusionary contract is what you want. This type of coverage includes every mechanical aspect of your RV except for what is specifically "Exluded from coverage" or listed as "Exclusions" or "What Is Not Covered" in the contract.
Note: Exclusionary contracts can have multiple levels of coverage and may have specific provisions that exclude coverage in lower levels and include coverage in higher levels of coverage. Be sure that you request the most comprehensive coverage available.
Listed Component Contract - This type of contract lists only what will be specifically covered. If it's not listed, it's not covered. This type of contract can make it very difficult to determine what is NOT covered, although it is a less expensive option.
Note: Though you want comprehensive coverage (the best coverage available in an exlusionary contract), depending on the year and condition of your RV, that coverage may just be too expensive. However, you may still be able to get Listed Component coverage for your motorhome or towable.
Coach Only Contract - This type of contract is best for motorhome owners who have high mileage RVs that can't qualify for the more robust coverage. It covers most components, but excludes the engine, transmission, drive axle, and steering components. It's also an inexpensive option to supplement a chassis manufacturer warranty that is still in effect.
Contract Protection - One thing you don't want to have to worry about is completely losing the money you invested in an extended warranty. You hope you don't need the coverage or have any claims, but you certainly don't want your money to disappear leaving you with no coverage at all.
Therefore, it is very important to check out the financial condition of the insurance company backing the Administrators' "claims reserve account". Ask about those insurers and get their A.M. Best ratings - look for "A-rated" insurers.
Be wary of "Risk Retention Groups" that are backing extended service contracts. They are not regulated as well as insurance companies and several have gone bust. There are a few good ones, but I, personally, would want more security.
Flexibility and Convenience - When you are looking for an extended warranty, you want to be able to access repair facilities of your choosing wherever you may be at the time of a breakdown. Be careful of warranties that require you to use certain repair facilities or networks thus limiting where you can go for service.
Service - One thing that is often missing when you buy an extended warranty is service from your Contract Provider (the company from which you bought the contract). Unfortunately, too often there is little or no assistance from the people that sell you an extended warranty. Many simply want to make a sale and wash their hands of any future issues.
A top-notch Contract Provider will offer you after-the-sale service. There can be disputes between repair facilities and Administrators as to the extent of repairs, the labor for repairs, the necessity for repairs, and the coverage for repairs. And there, no doubt, can be finger-pointing going both ways. Often the Buyer is caught in the middle, so it's always a plus to have a Contract Provider that can serve as a mediator to try to work out a solution on your behalf.
Other Items To Look For:
- Deductibles - Make sure you know the deductible and whether it is a "per visit" or "per item" deductible. You don't want to pay a deductible on every repaired part, so make sure that you only pay one deductible per repair facility visit. Also, higher deductibles can mean a lower overall price of the extended warranty, and savings can be significant (Note: the savings from a higher deductible tend to be more significant for motorized RVs than for towables).
- Payment Of Claims - Be sure that the warranty Administrator pays the repair facility directly. It's a big red flag if the Administrator requires you to pay the repair facility out-of-pocket and then submit receipts for reimbursement. Now, with that said, also be cautious of repair facilities that won't work with warranty companies and/or that require you to pay them up front and you have to file your own claims to get reimbursed.
- Repair Facility Payment - Be sure that the warranty Administrator will pay the repair facility via corporate credit card. The repair facility doesn't want to wait for a check and the sooner they get paid, the sooner you can be on the road.
- Retail Costs - Also, make sure the warranty Administrator pays full retail to the repair facility for parts and labor. They may disagree on the number of hours for the repair or on the parts to be used, but once they work that out, the repair facility should receive full retail prices.
- Transferability - Make sure that your extended warranty is transferable. There may be a small transfer fee, but if you sell your RV having the remainder of an extended warranty on it could make for a quicker sale. Of course, in the case of a sale, you may decide to cancel and get a check back (see "Cancellation" below) rather than transferring it.
- Cancellation - Determine what the cancellation policy is. Can you cancel within 30 or 60 days and get a full refund? What is the refund policy after the initial "probation" period? Many extended warranties will give a pro-rated refund based on the time left on the contract if you cancel. There may be an administrative fee to process the cancellation or refund, so know what that cost might be. Also, your refund could be reduced by any claims already paid out (which is reasonable), so be sure to know if that is the case.
- Inspections - Does the warranty Administrator require an inspection of your RV? An inspection may be performed at the time of warranty purchase to identify any "pre-existing" conditions. Pre-existing conditions (mechanical issues existing at the time of the purchase of the extended warranty) are not covered, so an inspection helps identify those conditions and may prevent a claim denial later. Inspections are more likely if you are not currently covered by a warranty at the time of the extended warranty purchase.
- Additional Benefits - Many extended warranties have towing benefits, roadside assistance benefits, emergency repair provisions, lodging reimbursements, and other minor benefits. Often these have fairly low dollar limits, so know the details and don't expect these benefits to substitute for a specialized RV roadside assistance plan.
Getting The Most Out Of Your Extended Warranty
In this section, we'll try to explain how to get the most out of your extended warranty. By that I mean, how to use it most effectively and get claims paid without frustration. Stress comes from having expectations too high and those expectations not being met. So, it's important to make sure owners of extended warranties have a realistic expectation of what should happen when a claim is filed.
1. Understand your contract.
Yes, the contract is a bunch of legal mumbo jumbo, but it is important that you understand it. Have someone familiar with warranty contracts review it for you if possible. If that's not possible or too expensive, read over it slowly until you understand it or jot down questions you need answered. Ask the person that is selling you the warranty about provisions you don't understand. Of course, you need to have trust in that individual due to the obvious conflict of interest. Again, the contracts can be complicated, so no one will know every answer to every question, but the good Contract Providers will find the answer for you if they don't know.
With all of the above said, don't be intimidated by the contract. For the most part, repair facilities know what is and isn't covered and Administrators don't go out of their way to deny claims as long as their suspicions aren't raised.
The Administrators have to be on the alert for fraud and misrepresentation so they aren't paying out illegitimate claims at the expense of the honest customers and repair facilities. Yes, the Administrators do sometimes deny claims that certainly aren't fraud or misrepresentation and seem like they should have been approved, but that is the exception rather than the rule, although many incorrectly believe it is the other way around.
2. Understand what is NOT covered.
This is where the most confusion and frustration occurs. When you read a contract, it looks like a lot is not covered, but in an exlusionary contract, at least it's all listed out. Many of the excluded items are common sense (must have a VIN, odometer must be working, items covered by manufacturers warranty or by collision/comprehensive insurance are not covered, etc.).
In some cases, you can add optional coverage for items you are concerned about that are specifically not covered in the base contract.
Many things like lights, batteries, tires, wheels, mirrors, belts, and other items that should be routinely replaced are not covered. Cosmetic items are not covered. General maintenance items are not covered.
Health insurance companies these days are paying for preventative care in order to keep future, larger claims down. But that's not the case for warranty companies - if it ain't broke, there's no coverage. They don't pay for preventative actions that might save them money later.
Be aware of the "Consequential Damage" clauses. Many RV extended warranties exclude "repairs of covered parts caused by failure of non-covered parts" and "repairs of non-covered parts caused by failure of covered parts". These are "Consequential Damage" clauses. These clauses can cause denials of large claims, so it might be wise to look at optional "Consequential Damage" coverage if it is available.
If you aren't sure whether something should be covered and it is a concern, ask before you buy.
3. Perfom routine, manufacturer-recommended, scheduled maintenance.
A service center can do this or you can do it yourself, but make sure you maintain records and receipts. Proper maintenance is actually a requirement of most extended warranty contracts and failure to perform the maintenance could result in claim denial. If you haven't kept records of your service and maintenance before the warranty purchase, definitely keep them afterwards.
4. Make sure your repair facility gets pre-authorization BEFORE doing any repairs.
Pre-authorization is a vital part of the service contract and it is YOUR responsibility to make sure your repair facility gets that authorization.
It's very important to work with repair facilities that have good warranty departments or personnel that are used to completing the proper procedures for warranty coverage. A good warranty person in a repair facility can make things go very smoothly and reduce the possibility of claims denial. He or she may be the most important person in the whole repair claims process.
Note: Sometimes larger repair facilities can be better for warranty services simply because they have dedicated, experienced warranty personnel.
Still, make sure you know that they get pre-authorization, and be sure you understand what your charges (beyond the deductible) will be if the repair facility doesn't get approval for everything they submitted to the warranty Administrator.
In some cases, the repair facility may accept what the warranty Administrator authorizes and waive the additional costs as it relates to the covered repairs. In some cases, the repair facility may charge you for the difference. Know where you stand before authorizing the repair facility to go forward.
Before we leave this section, let's discuss emergencies. Most extended service contracts have an exception to the "Pre-authorization rule" for emergency repairs. But coverage for emergency repairs is very specific, as are the procedures for getting reimbursed. So be sure you understand the emergency repairs provisions.
5. The warranty Administrator will pay what is necessary to complete a covered repair, but usually not for upgrades.
Your repair facility may want to use upgraded parts or you may want to have upgraded parts. In certain circumstanes, the warranty Administrator may cover the upgrade if there is a good, well-documented reason.
However, don't expect that kind of approval, and remember you always have the option of paying the difference for the upgrades.
6. Let the warranty Administrator inspect your RV.
If the warranty Administrator wants to have your RV inspected to verify the condition of the RV and determine if there are any pre-existing conditions, let them inspect. If an independent inspector chosen by the Administrator doesn't document pre-existing conditons, there is less chance of a claims denial on that basis. Also, sometimes the inspectors might bring your attention to a problem you were unaware of.
7. Try not make claims too soon after the contract purchase.
Warranty Administrators don't want to deny claims, but they have to be strict in their reviews in order to protect all the contract holders. Claims made immediately after contract purchase will automatically be under suspicion. Such claims will attract extra scrutiny. In fact, some contracts have short "waiting periods" (measured in days or miles), before a claim can be filed.
Of course a breakdown or parts failure may happen right after the contract purchase. Just be aware that it will automatically be reviewed with extra scrutiny. It's more likely an inspector will be sent out to make sure it wasn't a pre-existing condition, and your documented maintenance and service records are even more important.
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