You buy a repair agreement in case of an emergency repair with your car, but what if something goes wrong with your actual contract? What should you do?
Let’s say you have a repair to do on your car, and you need to report a claim. But what if your service contract company goes out of business? All vehicle service contract providers (VSCP) and dealer obligor are legally required to have a licensed insurance company guarantee their service contracts. The guarantee means that if the VSCP or dealer fails to pay a claim, either because the obligor is out of business or simply does not think the claim is covered by the contract, then you can go to the insurance company to pay the claim.
The law requires that the name and address of the insurance company be printed on the contract, so make sure it’s on there when you buy it. You also want to make sure that the VSCP company actually has the approval of the insurance company because some companies have been known to print them without their approval. In that case, the insurance company may not evaluate your claim.
Rating organizations grade insurance companies on their financial strength, so you will want to check up on that, too. The strongest insurance companies will have an “A” rating and so forth. To be safe, you can look online to find the rating of the backup insurance company on your service contract before purchasing.
There is one exception to this law. A VSCP can sometimes be insured by a risk retention group, which is a special type of insurance company but not actually an insurance company. It’s a little confusing, but the main difference lies in the fact that risk retention groups are not licensed by the Department of Insurance like other insurance companies are and, as such, do not have to abide by all of the same regulations that insurance companies do.
Another problem that can sometimes arise when it comes to your contract is the time it takes to repair your car. Your car is essential to your life, but sometimes you have no choice but to do without it. Of course, you don’t want to go for too long. Unfortunately, some obligors or claims administrators take several days to inspect your car and come to a decision regarding coverage. You might be tempted to just go ahead and get it repaired and then get the obligor to reimburse you. However, the obligor could deny your claim, and you’ve spent money that you might not have had to.
Instead, if the repairs are being unreasonably delayed, contact the insurance company mentioned above. The backup company will help clear things up, and if that doesn’t work, contact the Department of Insurance for further assistance.
However, once you’ve received authorization from the obligor regarding your claim, you might still experience delays. If it is taking weeks or months to complete the repairs and it seems that the repair facility is at fault, contact the Bureau of Automobile Repair. They are the state agency that licenses and regulates car repair shops. This also applies if you think the repairs have been done improperly.
And what if you want to cancel the service contract? All service contracts are cancelable by law. The obligor must give you a full refund if you meet the following requirements:
· Cancel within 60 days after receiving the contract or 30 days if it’s a used car without manufacturer warranty.
· Send cancellation notice in writing to the person specified on the contract (i.e. the dealer, VSCP, administrator, etc.).
· Have not filed a claim with the dealer, VSCP, or administrator.
And if you have filed a claim, don’t worry. You are still entitled to a partial refund if you cancel within 60 or 30 days (whichever applicable). The obligor will calculate the refund based on the time or mileage that has passed since the purchase.
Even if the 60 or 30 days have passed, you are still entitled to a partial refund. It will be just like above. The obligor will calculate it based on the elapsed time or mileage as specified in the contract. The obligor may assess a fee up to $25.00 or 10% of the premium, whichever is less.
If you find yourself in the situation where a VSCP or dealer is not honoring the cancellation and refund sections of the contract, again contact the backup insurance company. That’s what it’s there for. And, again, if the insurance company does not resolve the matter, contact the Department of Insurance.
We hope that when you hit the occasional bump, you know how to handle the situation.