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Jeffrey Brewer
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Phone:
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847-553-3763
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Jeffrey.brewer@pciaa.net
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PCI Provides Consumer Tips on Buying Vehicle Service
Contracts
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CHICAGO – The Property Casualty Insurers Association of
America (PCI), an insurance trade association representing companies that
provide vehicle service contracts, strongly condemns the overly aggressive and
potentially illegal marketing tactics of a few companies selling vehicle
service contracts.
In light of Federal Trade Commission suits in federal
court and attorneys general from around the country investigating a few
companies for alleged unethical and misleading sales practices, PCI is coming
forward with tips and information that can help consumers make sound decisions
regarding the purchase of a vehicle service contract, sometimes referred to as
an extended warranty.
“A vehicle service contract can be a wise investment,”
said Alex Hageli, director of personal lines for PCI. “During this challenging
economic environment, consumers are looking for ways to make their dollar go
farther and their budgets more bulletproof. They also are holding off on major
purchases, such as new vehicles. Because the risk of major component failure
increases with vehicle age, consumers may face unexpected expenses. Depending
on a consumer’s personal risk preference, a vehicle service contract may help
defray these costs.”
However, not all vehicle service contracts or the
companies that provide them are the same. There are important differences that
should be taken into consideration and PCI encourages consumers to shop around
for the product and provider that best suits their needs.
“There is a lot of confusion due to the marketing
practices of a few companies and consumers should be cautious regarding
solicitations that violate the Do Not Call list or place undue pressure on them
to make a purchase,” said Hageli. “There are many reputable companies who
offer these products and consumers would be well served to do their homework,
when looking to make an investment in protecting their vehicle.”
If a consumer is considering a VSC purchase, they should
consider these top five questions:
1. Is the contract easy to understand?
Read the coverage terms before you purchase the contract. Companies that
clearly state the scope of their coverage in the body of the contract are the
ones with which consumers want to do business.
2. Do the coverage terms and limits make
sense for your personal situation? Every situation is unique, but there
are a few basic questions every consumer should ask:
• Does the term and mileage of the VSC make
sense to you, considering how long you plan to own the vehicle or how you plan
to use it?
• Are you comfortable with the deductible that
you would pay in the event of a loss?•
• Does the VSC offer additional benefits, such
as rental coverage or trip interruption?
• Can you cancel the contract if you change
your mind or sell the vehicle, and what sort of refund can you receive?
3. Who is providing the coverage?
As a general rule, consumers should look for VSCs that give them the right to
make a claim against a licensed insurance company, preferably with a financial
strength rating of “Excellent” (A- or better) from A.M. Best Co. This is the
rating agency for the insurance industry, and consumers can look up ratings at
www.ambest.com.
Consumers also can ask how long the company has been in
business. Companies that have been selling VSCs for many years not only have demonstrated
a commitment the product and the market, they also are focused on developing
long-term, repeat customer relationships. This translates to better customer
service.
4. Is it easy to receive coverage
benefits? Is the repair process simple & convenient? Reputable VSC
companies try to make the process of both purchasing and servicing the service
contract as easy for the consumer as possible. Consumers should investigate how
claims are paid. Does the VSC provider pay claims directly or does the consumer
have to pay first and then seek reimbursement? Are there limitations on where
vehicle can be repaired? A required reimbursement process, limitations on
repair facilities and lengthy approval processes can all add complexity and
time to the claims process.
5. Are you comfortable with your provider?
Use your common sense. Make sure you are dealing with a nationally
recognized company that has been in the business for a period of time that
demonstrates a long-term commitment to the VSC product and their customers. Ask
yourself if the price seems reasonable for the level of coverage you are
getting. If it seems too good to be true, it probably is.
PCI is composed of
more than 1,000 member companies, representing the broadest cross-section of
insurers of any national trade association. PCI members write over $176
billion in annual premium, 35.9 percent of the nation’s property casualty
insurance. Member companies write 43.8 percent of the U.S.
automobile insurance market, 29.6 percent of the homeowners market, 32.8
percent of the commercial property and liability market, and 38.4 percent of
the private workers compensation market.
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