Glossary
Glossary of vehicle service contract and protection program terms
As you research vehicle service contracts and protection programs, it’s important to understand terminology used in the automotive aftermarket industry. The following is a list of common terms you’ll need to become familiar with:
A Rated – A rating provided by the independent insurance evaluator A.M. Best Company indicating financial strength and stability. An A rating (A+, A, A-) is the highest A.M. Best rating an insurance company can receive.
Administrator – The company that is contractually obligated to perform under the service contract; they will authorize and pay the repair facility for covered repairs to your vehicle. The administrator works with the repair facility to make sure your claim is handled properly. Because they are the company that pays your claim, their financial strength is an important factor in choosing a reliable company.
Tip: American Auto Shield is the administrator of its contracts. To compare American Auto Shield with other companies, click here.
A.M. Best Company – A worldwide insurance-rating and information agency founded in 1899. Policyholders and depositors refer to Best’s ratings and analysis as a means of assessing a company’s financial strength and stability.
Authorization – The approval provided by an administrator to permit repairs to be performed.
Auto Warranty – See Manufacturer’s Warranty, Extended Warranty and Vehicle Service Contract to learn the difference.
Basic Warranty – The specific terms established by each manufacturer to repair vehicles through a specified mileage and/or time period. All factory-installed and many dealer-installed parts are covered under this warranty.
Better Business Bureau (BBB) – The Better Business Bureau (BBB) is a reputable source that consumers can use to research a company’s background and profile. In order to participate in the BBB Online Reliability Program and Accredited Business Programs, a company must agree to abide by the BBB Code of Business Practices, have a satisfactory complaint handling record, agree to participate in the BBB’s advertising self-regulation program, and agree to dispute resolution with the BBB. Most of the companies who participate in these programs value their standing with the BBB and strive to handle complaints as professionally and expeditiously as possible.
Tip: You can look up a company’s Better Business Bureau report by visiting: www.bbb.org. To view American Auto Shield’s BBB report, click here.
Certified Car - Many cars sold used or off lease are certified by the manufacturer. This means they have undergone a quality inspection process prior to sale. Often, a limited powertrain warranty is attached to them. Most do not have exclusionary coverage. There is no industry standard for certification. Dealers and/or manufacturers often add a significant cost to certified vehicles.
Claims Reserve Account – An insured account that the administrator will maintain to pay future claims.
Commercial Use - Any vehicle used for business purposes.
Tip: Tow trucks, taxis, police vehicles and vehicles used for emergency purposes are excluded from vehicle service contract coverage.
Consumable Items - Parts such as tires, batteries, clutch plates and wiper blades that are generally not covered under any warranty or vehicle service contract.
Corrosion Warranty - Covers rust through perforation on sheet metal. Offered as original warranty on new vehicles. Vehicle Service Contracts do not cover corrosion.
Covered Part – Any part of the vehicle listed in the service contract as a Covered Part and not excluded from coverage by the contract.
Deductible – The amount that you must pay the repair facility for work once the vehicle is repaired. Vehicle Service Contracts are typically offered with different deductible options ($100, $50 or zero).
Tip: Find out how the deductible is applied. Better vehicle service contracts will apply the deductible on a per repair visit basis. Beware of those that apply the deductible on a per part basis.Diagnostics – The effort by the repair facility to determine the cause of the vehicle’s problem, and to determine the necessary course of repair. Most plans typically do not cover diagnostics, unless the diagnostics lead to the repair of a covered component.
Diamond Coverage - AAS Diamond Coverage is exclusionary coverage, which offers coverage for all of the parts and components of the covered vehicle, with the exception of those parts and components specifically listed in the contract as “not covered”. AAS Diamond vehicle service contract coverage is the most comprehensive coverage you can purchase.
Dun & Bradstreet (D&B) – A trusted third party source that thousands use every day to determine the credibility and legitimacy of a company.
Tip: You can look up a company’s D&B report by visiting: www.dnb.com. To verify American Auto Shield’s D&B registration, click here.
Drive Train – The components that transmit the flow of power from the engine to the wheels. The components include the clutch, transmission, drive shafts (or axle shafts in front wheel drive), U-joints and differential.
Drivetrain Warranty – See Powertrain Warranty.
Emissions Warranties – The Federal Emissions Warranty guidelines are based on federal regulations and apply to vehicles in all 50 states. Vehicles are covered by two types of emissions control system warranty, “Emission Defect Warranty” and “Emissions Performance Warranty.” Depending on the state you live in, the Performance Warranty is for 3 years/50,000 miles. The Defect Warranty is generally consistent with the manufacturer’s bumper to bumper warranty with certain parts (catalytic converter and electronic emissions controls (PCM)) for up to 8 years/80,000 miles. Please refer to your owner’s manual for your exact coverage.
Extended Warranty – A Vehicle Service Contract is often still referred to as an “extended warranty”, although as defined by federal law, only a manufacturer can offer a warranty – extended or otherwise. See Vehicle Service Contract.
Exclusionary Policy – See Diamond Coverage.
Gray Market Vehicle – A vehicle not manufactured for sale in the U.S. They often do not meet U.S. standards and carry no manufacturer warranty. These vehicles are typically ineligible for vehicle service contract coverage.
Inclusionary Coverage - A coverage plan that lists the parts that are covered by the vehicle service contract. If the component or part is not listed, then it is not covered.
In-Service Date – The date the vehicle was purchased by the original owner and driven off the lot or the date the vehicle was placed in use for rental, demonstration or other purposes.
Insurer – The insurance company that guarantees the obligations and responsibilities of the provider and/or administrator.
Lemon Law – The general definition of a Lemon Law vehicle: A vehicle with (a) major, repeated problem(s) that has been repurchased by, or had its purchase price renegotiated with, the manufacturer. The state then earmarks these as Lemon Law or Buyback vehicles. These vehicles are ineligible for coverage.
Limited Product Warranty – A warranty with certain conditions and limitations on the parts covered, type of damage covered, and/or time period for which the agreement is good.
Lubricated Part - Any part that requires lubrication to perform its function.
Maintenance Guidelines – The normal, routine maintenance that is recommended by the manufacturer of your vehicle to keep the vehicle in optimum condition. These include such things as oil changes, tune-ups, checking fluid levels, tire rotations, wheel alignments, belts, hoses and others as described in your owner’s manual.
Tip: All vehicle service contracts require that you properly maintain your vehicle.
Manufacturer’s Warranty – The standard warranty that every new vehicle sold comes with. All factory-installed parts are covered against defects. Typical manufacturer warranties are 3 years or 36,000 miles or 4 years or 50,000 miles. Check your manufacturer’s warranty manual for specific warranty information.
Mechanical Breakdown – A defect in parts and workmanship as supplied by the manufacturer, or a defect that makes the part unable to perform the function for which it was designed.
Mechanical Breakdown Insurance (MBI) – A policy, contract, or agreement that undertakes to perform or provide repair or replacement service, or indemnification for that service, for the operational failure of a motor vehicle due to a defect in materials or skill of work or normal wear and tear, and that is issued by an insurance company authorized to do business in California.
Named Component Coverage – See Inclusionary Coverage.
Participating Lender – The financial institution providing financing to you for the purchase of a service contract.
Powertrain Warranty – A limited warranty from the manufacturer that covers certain parts of your vehicle’s engine, transmission and drive train assembly. If any of these components fail while the vehicle is covered under the powertrain warranty, the manufacturer is responsible for the repair. These warranties cover only about 25% of the vehicle.
Rebuilt Title – See Salvage Title.
Recall – When a manufacturer recalls vehicles it has manufactured back to the dealership for specific repairs related to unplanned mechanical problems and/or safety issues. Recalls are usually voluntary and are made in conjunction with regulatory control of the National Highway Traffic Safety Agency (NHTSA). They can originate with the manufacturer or with the NHTSA. Repairs performed under a recall are usually free to the consumer.
Tip: Click here to search the NHTSA database.
Repair Facility – A licensed automotive repair facility located in the United States or Canada. This includes dealerships, local mechanics or national repair facilities.
Repair Sentry – An American Auto Shield exclusive service in which a professional mechanic or ASE Certified adjuster uses their experience and the various trade information databases available to them to negotiate reduced auto repair costs for consumers who typically pay what their repair shops charge. Adjusters are typically able to negotiate repair prices 10-30% lower than the price a consumer might normally be charged.
Rental Benefit – The amount you will be reimbursed for actual expenses incurred for substitute transportation while your vehicle is being repaired.
Roadside Assistance – A program that provides you with a toll-free telephone number to call 24 hours a day, 365 days a year. This is for assistance when your vehicle breaks down or when there is a vehicle emergency (towing, battery assistance, flat tire assistance, emergency lock out, or fuel, oil, fluid and water delivery).
Salvage Title – A title issued on a vehicle where an insurance company has declared the vehicle a total loss. These vehicles were typically involved in a flood or severe accident. These vehicles are not eligible for coverage.
Technical Service Bulletin: TSB – This bulletin is produced by the vehicle manufacturer and alerts automotive technicians about specific service problem areas, repair procedures, and new service techniques for a vehicle. Thousands of these are issued each year.
Tip: Click here to search the NHTSA database of Technical Service Bulletins.
Transferability – A vehicle owner with vehicle service contract coverage can transfer the vehicle service contract to the new owner of the vehicle if the vehicle is sold privately. A vehicle service contract cannot be transferred to a dealer.
Travel Interruption Benefit – In the event your vehicle is not operable, which causes a delay en route and you are more than 100 miles from your home, this is the amount you will be reimbursed per day for restaurants and lodging.
Vehicle Identification Number (VIN) – A VIN is a unique 17-digit identifier of your vehicle. The most common areas it can be found are:
- On the driver’s side dashboard of your car
- On your insurance card
- On the title to your vehicle
- On the vehicle’s registration card
- On a sticker inside the driver’s side door
Vehicle Protection Products and Programs - Products and programs designed to protect your vehicle investment and increase the resale value of your vehicle, such as vehicle service contracts, roadside assistance coverage, and product warranties.
Vehicle Service Contract - A Vehicle Service Contract is an agreement between a consumer and the service contract provider to pay for the cost of repair or replacement of covered mechanical parts or systems that fail. In short, it is a promise to perform certain services for the consumer and to pay for covered repairs to the vehicle.
Tip: Research the following before purchasing a vehicle service contract or other protection product:
- Who performs or pays for repairs under the terms of the service contract? Do they have the financial resources to meet their contractual obligations?
- Some states require that a service contract is underwritten by an insurance company. Does yours? If the contract is backed by an insurance company, contact your State Insurance Commission to ask about the solvency of the company and whether any complaints have been filed.
- How are claims handled? Can your vehicle be repaired anywhere – or do you have to return it to the selling dealer?
- Is there a toll-free number for claims? Test the toll-free number to ensure the company is easily reachable.
- How long does it take the repair facility to get paid?
- Is there coverage for emergency repairs outside of normal business hours?
- What is covered and not covered? Review the service contract BEFORE purchase.
- What are your responsibilities?
Vendor – A vendor is a company that sells service contracts or supplies parts. Vendors can range from dealers and direct marketing companies to membership organizations and financial institutions.
Waiting Period – A period in which no benefits will be paid if failure occurs within the specified time frame.
Wear-and-Tear Coverage – Wear and tear coverage provides coverage beyond total mechanical breakdown. Under this coverage, your vehicle is covered for parts that break, as well as those that have worn beyond the manufacturer’s tolerances.
WebAssured – WebAssured.com provides business background reports and consumer advocacy tools. The Web Assured seal on a website indicates the site subscribes to ethical conduct.
Tip: You can look up a company’s WebAssured report by visiting www.webassured.com. To view American Auto Shield’s WebAssured.com report, click here.
The information above was provided by AmericanAutoShield.com