Fine Print Terms Decoded: A Warranty Glossary

Warranty contracts are full of terms that sound clear until you need them. Knowing what they mean before you buy helps you compare plans and avoid surprises at claim time. Here's a plain-English glossary of terms you'll see in auto service contracts and home warranties.

Who's who in the contract

Obligor. The company legally responsible for paying covered claims under the contract.

Administrator. The company that handles claims, approvals and customer service. It may be the same as the obligor or a separate company.

Seller or marketer. The business that sells the contract to you. It may not be the company that pays claims.

Insurer or backing. Many service contracts are backed by an insurance policy that helps ensure claims get paid if the obligor can't pay. Rules vary by state.

Contract holder. You, the person who bought the contract.

Coverage terms

Exclusionary coverage. A contract that covers everything on the vehicle or home system except a list of specific exclusions. Usually the broadest type of plan.

Listed-component or named-component coverage. A contract that covers only the parts specifically listed.

Powertrain. The parts that make a car move, generally the engine, transmission and drive components. Our powertrain parts overview shows typical coverage areas.

Mechanical breakdown. The failure of a covered part to work as designed, from normal use. Most contracts cover this, not wear or damage.

Wear and tear. Gradual deterioration from normal use. Some plans cover parts that wear beyond specification, while others exclude wear entirely.

Consequential damage. Damage to other parts caused by a covered part's failure, or damage caused by a non-covered part's failure. Contracts treat these differently, so read carefully.

Pre-existing condition. A problem that existed before coverage started. Most contracts exclude these.

Cost terms

Deductible. What you pay toward a covered repair. It may be charged per visit, per repair, or per claim.

Service call fee or trade call fee. Common in home warranties. A flat fee you pay each time a technician comes out.

Coverage cap or limit. The most a plan will pay for a single repair, a single item, or across the whole contract.

Labor rate. The hourly amount a contract will pay a repair shop. Some contracts cap it.

Prorated refund. A refund based on unused time or mileage when you cancel, often minus a fee.

Timing terms

Waiting period. The time, mileage or both after purchase before claims are accepted.

Effective date. The date coverage begins.

Term. How long the contract lasts, often stated in years and miles, whichever comes first.

Free-look period. A window after purchase when you can cancel for a full refund, as long as no claims were paid.

Claim terms

Authorization or pre-authorization. Approval from the administrator before a repair begins. Many contracts require it.

Teardown. Disassembling a part to find the cause of a failure. Ask who pays if the repair isn't covered.

Inspection. A review by the administrator, sometimes in person, to confirm the failure and cause.

Maintenance records. Proof you followed the required maintenance schedule. Many contracts can ask for them during a claim. Our claims page has more.

Any licensed repair facility. A shop licensed to do repairs where you live, which many service contracts accept. Check your contract for details.

Ownership terms

Transferable. Whether the contract can move to a new owner when you sell, sometimes for a fee.

Renewable. Whether you can extend the contract when it ends. Common with home warranties.

Commercial use. Using a vehicle for business, such as rideshare or delivery. Often excluded or limited.

How to use this glossary

Keep it handy when you read a sample contract. Highlight any term you're not sure about and ask the seller to explain it in writing. Our FAQ answers more common questions.

How Warranty Wizards can help

We help you compare auto and home warranty plans from independent third-party providers and explain the fine print before you buy. Get a free quote at get a quote.