When people hear the terms "service contract" or "extended warranty," most consumers think of repairing the engine. But there are other benefits a service contract may provide that are often overlooked or misunderstood.
Many states are actively changing their laws to expressly authorize these types of benefits for consumers. Adding coverage for these benefits can enhance the overall ownership experience, helping consumers avoid costly repairs and reducing frustration when problems arise. This article provides a basic understanding of these protection products and identifies key 2021 and 2022 legislation.
There are several types of protection products that are expressly authorized within the definition of a service contract. These benefits can typically be offered within traditional service contract or as a stand-alone service contract. The following are a few coverages.
Many states have laws in place that expressly include these benefits in the definition of a service contract in some form, but an independent review of each state is critical to understand how a state would regulate these products. Regardless, for states that allow these service contract benefits, consumers have greater access to these products.
Key Legislation for Auto Service Enhancements |
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In 2021 and 2022, many states enacted, or have pending, laws that expressly authorize these types of benefits in the definition of service contract. Here is a summary. |
2021 |
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2022 |
Passed
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These protection products are typically sold through automobile dealerships at the point in time a new or used vehicle is purchased. There is an active after-sale market where products can be sold directly by third-party providers, banks/lenders, credit unions, over the Internet, and other channels.
Purchasing coverage for protection products can dramatically enhance the ownership experience, reduce costly expenses, and limit frustration when a breakdown occurs. Depending on the state, the inclusion of other products in the definition of service contract enables broader product distribution and availability for consumers to help find these coverages. These types of products are usually inexpensive and may be financed alongside the purchase of your vehicle. Many states have appreciated the value of these products and enabled changes to the definition of service contract to enable easy access and availability for residents.
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