Consumer Alert: Division of Insurance offers tips before purchasing a service contract


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Yeraldin Deavila
DOI PIO
Carson City, NV - June 18, 2021

As we approach the summertime and with temperatures rising, many Nevadans may be in the market for appliances like an air conditioning (AC) unit. AC units are expensive products, so it is not uncommon for consumers to consider purchasing a service contract, also known as an extended warranty, service agreement, or maintenance agreement, to cover the financial risk if the product fails and needs to be repaired or replaced. Before consumers buy a service contract for any big-ticket items, whether it be an AC unit, a refrigerator, or a car, consumers should be aware of some important facts.

Understand what you are buying

Service contracts ARE NOT insurance! Service contracts are a prolonged warranty offered by a warranty administrator, a retailer, or a manufacturer. Service contracts are usually offered by a vendor at the point of sale of a product. 

Read the fine print

It is important to read and understand the terms and conditions included in a service contract because many contracts have exclusions and/or requirements.  Some common exclusions revolve around the age and maintenance of the appliance. For example, you may be required to have your AC unit or furnace serviced annually and have proof of maintenance, otherwise, if you have a claim, it can be denied. If the appliance you are buying already comes with an extended warranty, often a service contract will not cover the item.

Some service contract offerings do not provide a copy of the contract to read at the time of sale unless you purchase the contract. Fortunately, there is a “free-look” period - typically 20 days - to read the contact and decide if you wish to keep it or not. If after reading the fine print you decide you don’t want to keep the contract, cancel before the “free-look” period is over because there may be cancellation and transfer fees. Be sure to follow the cancellation procedure set forth in the contract.

Pro Tip: If you don’t want to pay for the contract before you read it, check out the Division’s website for the “Service Contracts Look-up Tool” which contains a listing of licensed Service Contract Providers and each service contract that is approved for use in the State of Nevada. To view this tool visit: https://doi.nv.gov/Consumers/Service-Contracts/.

Verify if a Service Contract Provider is licensed

Even though service contracts are not insurance, the Division is still charged with licensing service contract providers. There are many service contracts companies selling numerous contracts which is why it is important to verify that the companies are licensed to do business in Nevada. To verify if a company is licensed you can visit the Division’s website at https://di.nv.gov/ins/f?p=licensing:search and click on “Company Lookup.” Note: warranties offered by the manufacturer and service contracts for items of less than $250 are not required to be licensed.

If you are offered a service contract or have purchased a service contract underwritten by a company that is not listed on the Division’s website, please notify the Division at pcinsinfo@doi.nv.gov.

About the Nevada Division of Insurance

The State of Nevada Division of Insurance, a Division of the Nevada Department of Business and Industry, protects the rights of Nevada consumers and regulates Nevada’s $18 billion insurance industry. The Division of Insurance has offices in Carson City and Las Vegas. In 2020, the Division investigated more than 2,300 consumer complaints, answered over 10,000 inquiries, and recovered over $4.5 million on behalf of consumers. For more information about the Division of Insurance, visit DOI.NV.GOV. 

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