Warranties, guarantees and your rights
03/05/2019 Warranties are one of the biggest cash cows for the insurance services industry. Why? Well, loads of us have at least one, most of us instantly forget about them (or lose the documents) – and the proportion of people who actually claim on them is so low that they generate huge profits for insurance brokers and underwriters.
But are they any good? In simple terms, warranties have a bad reputation – and many of the ones Resolver has seen deserve it. Often overpriced, offering services that you’re covered for already through manufacturer’s guarantees or other insurance policies, and containing tons of baffling or plain unfair terms and conditions, they can make it a nightmare to claim. Of course, not all warranties are bad – but some aren’t worth the paper they’re written on. Here’s a quick guide.
Guarantees, warranties and service contracts
So, what is a warranty? Well, there are three main kinds of agreement you can get when you buy goods that'll give you a bit of reassurance if your new things pack in or get damaged.
- A warranty is a regulated insurance contract you take out so an item you buy – anything from a sofa to car – is insured and gets repaired or replaced if it breaks or is damaged. They’re often called ‘extended warranties’, too. The insurance underwriter, not the trader or manufacturer, decides what to do with your claim.
- A guarantee is usually included for free when you buy something and is a promise from the trader or manufacturer that they will repair or replace the item (or give you a refund) if it becomes faulty within a set period of time. They're often called ‘manufacturer’s guarantees.
- A service contract is an agreement between you and the trader or manufacturer that looks like an insurance contract, but isn’t. They usually work in the same way, but your rights are different if there’s a dispute.
- Sounds confusing? That’s because it is! It’s not always easy to tell what agreement you have without looking at the small print on the bottom of the agreement but make sure you ask when you make the purchase.
Your rights, if things go wrong
You have lots of statutory rights when things go wrong with goods or services you purchase. Here’s how it works.
- 30 days: You can reject something you’ve bought outright in 30 days of purchasing and get a full refund. That doesn’t mean you can wear a new dress for a selfie and return it – you might get barred by the shop!
- 6 months: if the goods are faulty within a six-month period you can still return them, but it’s up to the seller (not the manufacturer) to prove that they weren’t faulty when you bought them.
So far, so good. And all without the need to turn to the guarantee, insurance or service contract. Of course, this being the law, expect exceptions to the rule and complications (the rules for digital content and things bought online are a little different for example).
Most guarantees will cover you for a period of around 1-3 years. These guarantees relate almost exclusively to faults or defects and won’t cover you for theft, accidental damage, pets that like to destroy your property, or other things.
So a guarantee is a useful thing to have, if you accept that it’s not going to cover everything. If the goods come with a guarantee, you might want to add them to your home insurance for additional cover, or wait till the guarantee is due to run out and add them later to save a bit of cash.
What about warranties?
If you make a claim on a warranty, the underwriter of the contract will assess what’s happened and if it’s covered, they’ll pay out to repair or replace the item. Bear in mind that you’ll only get what you paid for, so if your warranty covers your iPhone 6 then you won’t get a lovely new iPhone X – you only get the cash to replace what is damaged or lost.
Now many warranties are a bit rubbish, but that doesn’t mean you’ve lost out. Just because the contract might be filled with vague terms and bonkers exclusions doesn’t mean it’s fair. And if it’s not fair, you can take things further.
Resolver can help you make your complaint to the shop, manufacturer and insurance company so use our simple complaint tool to get started. But what if you’re not happy with the business’ response?
If you’re unhappy with an insurer, the Financial Ombudsman can look at your complaint. It’s the ombudsman with the most powers in law – and its decision is binding on the insurer (but not you). However, guarantees and service contracts are provided by the shop and we still don’t have a full retail regulator or ombudsman that can make the businesses pay out if there is a dispute in this area.
One last thing…
If you’re making a significant purchase, it really does make sense to think about getting a guarantee or insurance if you can’t afford to lose or replace it. But don’t feel pressured in to taking out a contract at the till or on a whim. Take some time to think about it and look at all the options – including buying one online separately.