What is an insured warranty and why does it matter?

As an insurance broker, ALA only provide insurance based and backed warranty policies to our customers.

Not all warranties are insured – but if you buy a non-insured warranty what does it actually mean for you?

Insured Warranty

The standards for any company selling an insured warranty are high – they must be authorised and regulated by the Financial Conduct Authority (FCA)  in the same way as banks, finance companies  and general insurers.

This means that the company and its employees must comply with FCA regulations. If these are not adhered to, the FCA will impose fines and possibly take legal action against the company and/or individual involved.

Non-Insured Warranty

Whilst all companies must act in accordance with trading standards, for companies selling non-insured warranties there are no mandatory regulations that
have to be complied with.

This means you would have no redress for poor selling standards, for example if the company mis-sold or  mis-represented the policy in any way.

Insured Warranty

The FOS is an independent, public body set up  by Parliament.

Essentially, if you’re unhappy with an insurer and haven’t had a satisfactory response using the company’s own complaints procedure the FOS are there to resolve the complaint in a fair, impartial way.

Importantly, they have the ability to enforce their decisions, meaning if you’ve not been treated properly, they can tell the insurer how they need to rectify the situation.

Non-Insured Warranty

If the warranty is not insured, and you’re unhappy with the service or a settlement, your only option is to make a complaint to the warranty company itself.

If the company makes a decision that is not in your favour there’s nowhere to go and you’re most likely out of pocket – the independent Ombudsman is only available for insured warranties.

Insured Warranty

If your insurer goes out of business and can’t meet its liabilities under the policy, you can claim compensation through the FSCS – it’s as simple as that.

This means that with an insured warranty you have a form of redress from an impartial public body – you’re not reliant solely on the company itself where it may not even be able to help you.

Non-Insured Warranty

Essentially there is no independent external recourse if you have a non-insured warranty and the company fails.

This leaves you with no cover and no compensation.

One other thing to bear in mind

As there is no underwriter for a non-insured warranty, there is a finite “money pot” to cover the cost of any claims.  Once this runs out they can’t cover any further claims, potentially leaving you with a broken-down vehicle and having  to cover the costs yourself AND no recourse or redress other than the company itself!

Overall it is a much safer option to opt for an insured warranty – with this you have the protection of the FCA,  the Ombudsman and the Compensation Scheme, should you need it.

With a non-insured warranty you’re left at the mercy of the company themselves, with no independent remedy options if things go wrong.

Popular manufacturers