If You Know the Rules You Can Play the Game. Why Warranty Claims Are Denied
Your vehicle's manufacturer warranty is just about to expire and you have decided that you like this vehicle a great deal and will stay with it for the long haul. Additionally, you have decided to purchase an extended warranty for the vehicle. You spend an evening surfing the Internet and hear all the horror stories of how my claim was denied because of this or the warranty company didn't pay that. If you know the rules you can play their game. Not just play but also win. Here's how this whole thing breaks down. Pardon the pun!
First of all lets acknowledge the fact that there are two sides to every story and we need to consider both. You know somewhere down the road your vehicle is going to breakdown and you hope that the expense of your warranty will pay for itself in repairs. There is a simple equation for this math and it goes something like this. Cost of warranty divided by term of warranty gets you a number ($250) per year. Will my vehicle have a repair that costs this much for each year? Maybe yes, maybe no! If it doesn't then simply roll that cost into the next year. Will my vehicle break during the second year and will the repair equal or exceed ($500.00) and so on and so forth through each year. By purchasing an extended warranty you made an investment in your vehicle. Why wouldn't you protect your investment? By this we mean why wouldn't you follow the manufacturers recommended service intervals? Seems like a good question right? Your warranty company is asking the same thing.
Let's compare your purchase of an extended warranty to your health care insurance. When you bought a package from your healthcare provider you were asked a series of questions; are you a smoker? Do your drink? Do you sky dive? Do you participate in any high risk hobbies? What is your workout regiment? What are your eating habits? Maybe you see where I am going with this. Your warranty company is going to ask the same questions about how you maintain and drive your vehicle.
Just like a healthcare provider, your warranty company wants to make sure that you have a balanced regiment regarding the care of your vehicle. If they are going to guarantee your coverage they expect a certain level of maintenance commitment from you.
As we stated previously, you're gambling on the fact that your family vehicle will potentially breakdown and that the money you spent for this particular coverage will be a mere pittance in cost as to what the insurance company will pay out. The warranty provider is gambling that your vehicle will not break as soon as you think it may. If you can't prove that you maintained the vehicle properly and didn't kept a detailed log of service and receipts then they might possibly deny your claim.
"Can you prove that you maintained the vehicle according to the manufacturers specifications"?
Now the next question arises. How can I pay $1200.00 to $1500.00 (approx) for a warranty and have lets say $8,000.00 in claims over the life of my contract paid? The warranty company is taking a portion of the money you pay out for the purchase of the warranty and investing it with others like yourself in some fairly high yield returns. If you make claims right off the bat then they can't obtain the rate of returns on that money as they anticipated. Thus major claims go up for scrutiny. Your saying "hey, I paid for this coverage, my vehicle is broke, now pay the claim." The warranty company is saying, "can you prove that you maintained the vehicle according to the manufacturers specifications" (outlined in the back of the owners manual)?
It works the same way as your healthcare coverage. If you break a bone or are in accident and file a claim early in your term you will probably have no problems being approved. However if you go to a Neurologist to have an MRI done and file a claim someone is going to ask some serious questions about your past history and activities. A vehicle is designed very much the same as a human being. Fuel=Food, Lubricants=Blood, Suspension=Arms and Legs, Computer=Brain and Exercise=Maintenance, you can easily see the relation.
A warranty company is the same they will pay most claims even early in your coverage term as long as they are not catastrophic. These types of claims are not as common in today's vehicle designs. Most manufacturers build a vehicle's major components such as motors and transmissions to hopefully last for many years with regular maintenance, much like a person that eats right, exercises and gets plenty of rest, but occasionally we still get sick. The same holds true with your vehicle.
If you are going to win you have to know how to play the game. The rules are simple, if you follow these guidelines not only will you have the peace of mind that goes with an extended warranty, but also you will have the ammunition necessary to prevent unwanted claim denials.
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First and foremost read your service contract, know the required parameters for recommended service.
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Keep a service log of all work performed on your vehicle, no matter how big or small.
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Save all receipts for routine maintenance that you performed, i.e. oil changes, filter replacements, fluid changes, tire rotation, etc. Additionally make photocopies of register tape (receipts) since these can fade over time and become invisible. Your photocopy won't.
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Half way through the term of your extended service contract take your vehicle and have it inspected. This will work for you in two ways. 1) It will show the warranty provider that you are serious about preventing mechanical failure while 2) giving you the heads up on unforeseen repairs. There is a minimal cost for the inspection, however, this health exam for your vehicle will aid in the long haul ahead.
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Periodically contact either your local dealership be it GM, Ford, Chrysler, Toyota etc and request the service department to pull any open campaigns or recalls concerning your vehicle, by giving them the VIN number. This will keep you up to date as to whether there are any recalls open for your vehicle either public or silent and at the same time offering the manufacturer an opportunity to complete the service.
By following these tips you will greatly reduce the chance of having future claims denied while keeping your vehicle in maximum operating condition.
Roger Linder 9-15-2004
Roger Linder is a contributing editor to the Auto Warranty
Buyers Review. He is co-owner and Director of Sales for Auto Warranty Associates.