Guide to Auto service contracts

11 All repair agreements contain many provisions. The most important provisions involve: • The Obligor • The Price • The Duration • What Is Covered • What Is Not Covered • What You Need to Do If There Is a Claim • The Backup Insurance Company The Obligor — When you pay several thousand dollars for a car you usually get to drive away in the car. But when you pay hundreds or thousands of dollars for a VSC to protect against the cost of car repairs, you only get a piece of paper - a contract that is legally binding between you and the obligor. As discussed above in the section “Types of Repair Agreements,” there are three types of obligors: VSCPs, dealers, and insurance companies. Over the past 40 years, dozens of VSC companies and car dealers have gone out of business. In many cases, car owners who purchased repair agreements from one of these companies that went out of business were stuck with unpaid repair claims. Their repair agreements became worthless pieces of paper. If you buy a VSC, it is important that you only buy it from a car dealer, and that the VSC contains the name and address of the CDI-authorized backup insurance company. The CDI has received many complaints from people who bought repair agreements from companies that were operating illegally. Licensed VSCPs, and insurance companies that sell MBI policies, must follow dozens of rules to reduce the chance of bankruptcy, pay valid claims promptly, and otherwise treat people fairly. Unlicensed companies that sell repair agreements by phone, mail or the internet often do not pay valid claims and are committing a felony. Important Terms