In the beginning, there was nothing. Maybe a dealership coverage. Then there was US fidelis with a massive campaign. Now there are dozens of similar companies offering these.
Why the sudden appearance of these? Is it genuinely a new market that nobody had thought of before? A product of the current economical situation? New laws in effect?
Won’t these attract the kind of people likely to neglect their car maintenance and thus more prone to need expensive repairs?
Are they a good deal for the consumer? I am a bit of an insurance junkie, I love turning monetary surprises into regular payments. I have an almost 5-year old Jeep Liberty whose dealer bumper-to-bumper extended warranty is about to expire. Are these something I should look into?
Our local paper has been looking at U.S. Fidelis and its affiliates over the last several months. Go hereand search the site for U.S. Fidelis.
The short answer is that auto repair insurance is generally a lousy bet. The policies are riddled with qualifications and exclusions (that you won’t find out about until you’ve paid for the policy), they’re overpriced and a lot of shops simply won’t accept them as payment. That means you still have to pay the mechanic out of your own pocket and then file for reimbursement - and good luck with that.
Their sudden appearance is simply due to a high-intensity marketing strategy.
The best investment my wife and I ever made was opening up a special savings account earmarked for car repairs when we bought the cars, and putting a modest amount in there every month. By the time the warranties expired, we had a tidy sum put away for the inevitable big repair bill.
When the size of those potential surprises is manageable, you’re much better off with Kunilou’s approach of tucking the money away in an account you own.
A crude rule of thumb is that for every dollar you send to an insurance company, on average you’ll get back 50 cents. When instead the account is under your control, you get the benefit of all the money you put in.
Do other states not require drivers to carry auto insurance, then? California does, and I’ve never had any trouble with shops not taking insurance or stuff not being covered.
That’s not the kind of insurance being discussed. What you’re referring to is normally called auto insurance, the heart of which is liability coverage (required by most if not all states), which covers damage caused by accidents and such, with said damage being repaired by automotive body shops. What the OP is referring to is often called an extended warranty, but can described as auto repair insurance, with the understanding that it’s for mechanical repairs which are done by automotive (mechanical) repair shops. Whole different animal.
Very true. Until the day when the BIG bill comes and then all bets are off. Throughout my life history, extended warranties have been a total waste of money, health insurance a bit of a wash leaning towards small loss, auto insurance has gone from a very good deal to wasted money (knock on wood). Still, I know I am only one scary diagnosis or accident away from it all turning into a good investment.
With these service contracts, the story changes since basically the contract can be summed up as “We will pay the repair except in the case the product fails in which case we won’t pay”. They basically cover major issues of manufacturing which you should have found out during the regular warranty anyways.
My question still is, why all the sudden appearance of these companies? Did they exist before and didn’t advertise or are they really new companies? In either case, why the change? What triggered either their appearance or their new marketing effort?
Extended warranty companies have been around for decades. If they’re marketing more heavily now, it’s probably because of a confluence of factors: Autos are lasting longer, leaving people more prone to make (and worry about) repairs on middle-aged cars. A recession probably accentuates this. And newer cars have more expensive gadgets like navigation and DVD players that are prone to breakdowns after a few years.
I don’t know how reliable this cite is, but it confirms something that I read elsewhere: US Fidelis has a somewhat unsavory record when it comes to marketing. The gist of it is that they were making telemarketing calls, in complete disregard for the Do Not Call Act, and then deceptively telling customers that their warranties were about to expire, etc. Now all of a sudden they’ve gone for a more direct approach - advertising over the airwaves and being honest (at least partially so) about the fact that they’re an extended-warranty business.
Also, for reasons that I’m not really clear on, apparently this extended warranty/repair insurance industry was based (US Fidelis included) in St. Louis. Weird.