Why your extended warranty may deny your claim

Posted at 11:21 AM, Oct 22, 2014

Extended warranties, or service contracts as they are often called, promise peace of mind from car repairs.

But they're expensive, typically well over $1,000 these days for three or four years of coverage. Are they really worth it?

Tried to do the smart thing

Lonena Henn was worried about repair costs on her 2007 Lincoln that was approaching 100,000 miles.

So she decided to be proactive. Like millions of car owners, she answered an offer for an extended warranty.
"They give you a long talk about great the policy is," she said. So Henn agreed to pay over $3,000 for peace of mind.

Repair coverage denied

But when her Lincoln recently broke down, the dealership her car was towed to had some very bad news.

"If I could not produce receipts for oil changes and filters," she said, "they would not cover it."

The warranty company was denying her repair because she did not have all her records.

A spokesman for the warranty company directed us to the contract, which states you must save every oil change receipt, and be able to prove the oil was changed every 5,000 miles.
In addition, those changes must be done by a commercial facility, not by a family member, something Henn says she had done a few times to save money.

"I've been able to have my husband do it, or my son do it," she said.  But those money-saving home oil changes may have voided her warranty.
After we got involved, her repair shop agreed to lower her bill from $500 to $400, but the warranty company would only say it will re-examine her claim.

Henn says she'll think twice before buying coverage again. "Before you think of investing in something like this, get all the information, all the paperwork and read it very thoroughly," she said.

Read before you buy

The BBB gives the company that administers Henn's warranty an "A" rating, because it clearly spells out the rules in the contract, no matter how tough those rules may be.

The company in this case appears to have done nothing wrong.

So read the details on a warranty's coverage before you buy, so you don't waste your money.

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