Discount Warranties

Auto Warranty Glossary

by , Auto Protection Specialist

If you are interested in vehicle service contracts, also known as extended auto warranties, understanding the terminology policy providers use can be a great way for you to understand how these policies work. With this in mind, here is a glossary of frequently used terms to help you understand the components of vehicle service contracts better.

Administrator: This is the company that will pay for your automotive work when you take your vehicle to the shop for service.

A.M. Best: A.M. Best is like the Better Business Bureau for insurance providers. By using them, you can find out which providers are the most reputable.

Basic Warranty: A basic warranty will cover critical components such as your engine and transmission, but won’t provide protection for smaller parts such as your brakes.

Claim Reserve Accounts: This can be a separate holding for policy providers where they keep money on hand to pay for their customers' claims. When providers do this, you can have peace of mind in knowing they will pay your claims in an efficient manner.

Deductible: A deductible is the amount of money you must pay before your policy provider pays the claim.

Eligibility: This is the criteria policy providers have for determining whether they will cover your car. Typically, they will include the age of the vehicle and the mileage it has.

Extended warranty: An extended warranty is any level of protection given after the vehicle manufacturer’s warranty expires.

Inclusionary Policy: This is one of the most important parts of your service contract to pay attention to. This policy includes a list of automobile components your policy will cover.

Lemon Law: This law protects consumers from buying vehicles that are not road worthy. How this works is if you buy a car that breaks down often due to mechanical failures you may return it to the seller for a refund.

Maintenance Guidelines: This will outline the services you need to do to keep your vehicle in good condition. These services include regular oil changes, tire rotations and flushes. Typically, you can find this information in the owner’s manual of your car.

Manufacturer’s Warranty: This is the coverage your manufacturer offers on your car. For example, if you buy a new car most manufactures offer a three-year/36,000-mile warranty that covers parts.

Powertrain Warranty: This warranty covers the vehicle’s most important components such as its engine. Each manufacturer offers different terms of protection so it’s important to check with yours to see what coverage if any you have.

Rebuilt title: A rebuilt title is for vehicles that were salvaged, but have been restored. It is unusual for these to qualify for warranties.

Recall: Sometimes, a manufacturer will recall a certain model due to faulty parts. In these instances, most manufacturers offer to fix or replace the part for free.

Rental Benefit: If you have to take your vehicle into the shop for repairs, it is possible you could be without that vehicle for several days. This is where this benefit comes in handy. With it, you will receive reimbursement for car rental costs.

Repair Facility: This is where you take your car to receive service. It’s important to check your vehicle service contract to see if they have any limitations on where you can take your car for service.

Roadside Assistance: This is a useful benefit you can receive on your vehicle service contract. With roadside assistance, you can use this service if you have a flat tire, your car won’t start or if you lock your keys in your car. Often, you can use this benefit anytime you need it in both the United States and Canada.

Salvage Title: This is a title issued to vehicles that incurred bad damage due to accidents or other events. Even if someone restores these vehicles, it is unlikely they will qualify for extended warranties.

Transferability: This is great if you decide to sell your vehicle in the future. If you do so, you can have the coverage transferred to the new owner for little cost.

Vehicle Identification Number: Also known as VIN, this is a number specifically for your vehicle. You may find your vehicle’s VIN on the dashboard or the inside of the driver’s side door.

Vehicle Service Contract: A vehicle service contract can protect you if your car breakdowns or some of its parts become faulty. These contracts extended the manufacturer’s warranty when it expires and can include other useful benefits such as rental car reimbursement and roadside assistance.

Wear and Tear: This deals with parts of your vehicle that you will have to change regularly. These parts include items such as batteries and tires. Vehicle service contract providers won’t offer coverages for these parts.

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PLEASE NOTE: A Vehicle Service Contract is commonly referred to as an "extended auto warranty" or "breakdown insurance," however, it is not a warranty. A Vehicle Service Contract provides repair coverage for your automobile after factory protection plan expires; it is a contract between you and a service contract provider that lists covered repairs.