What to Do if Your Warranty Company Goes Out of Business

It's unsettling to learn that the company behind your extended car warranty or home warranty has closed. You paid for coverage, and you want to know whether it still exists. The answer depends on how your contract was set up and the rules in your state. Here's how to figure out where you stand and what to do next.

Know who's who in your contract

Service contracts often involve several companies, and the one that closed may not be the one that owes you coverage.

• Seller. The company or dealer that sold you the contract.
• Obligor. The company legally responsible for paying claims under the contract.
• Administrator. The company that handles claims and customer service, sometimes the same as the obligor.
• Insurer. In many states, the obligor's obligations are backed by an insurance policy, sometimes called a reimbursement insurance policy.

Find your contract and look for these names. They're usually on the first page or in a section about the obligor and administrator. If only the seller went out of business, your coverage may continue as normal with the obligor and administrator.

Step 1: Confirm what happened

Don't rely on rumors. Try to confirm:

1. Which company closed: the seller, administrator or obligor
2. Whether the company was sold or merged into another company that took over contracts
3. Whether a new administrator has been named to handle claims
4. Whether there's a bankruptcy or receivership case

Check the company's website, any letters you've received, and news from your state's regulators.

Step 2: Look for the insurance backing

Many service contracts are backed by an insurance policy that pays covered claims if the obligor can't. Your contract may name the insurer and explain how to file a claim directly with it if the obligor fails to pay.

If you find an insurer listed, contact them, explain the situation, and ask how to file claims or request a refund.

Step 3: Contact your state regulator

State rules on service contracts vary, but many states regulate them through the insurance department, the attorney general's office, or another agency. These offices may:

• Know whether the company is in receivership or bankruptcy
• Explain how claims and refunds will be handled
• Accept consumer complaints

Our car warranty by state page and home warranty by state page can help you get started on state-specific information. Always confirm details with the regulator directly.

Step 4: Protect your money

If coverage has truly ended and no one is honoring it, consider these steps:

• Ask about a refund from the insurer, the receiver or the seller.
• Contact the dealer if you bought the contract when you bought your car. Some dealers may help, especially if the contract was included in your loan.
• Check your loan. If the contract was financed into your car loan, ask the lender how the unused portion is handled.
• Contact your credit card company if you paid recently by card. Dispute rights have time limits.
• File a claim in bankruptcy if a case is open. The court or receiver will explain how.

Keep copies of your contract, receipts, payment records and all correspondence.

Step 5: Handle repairs in the meantime

If something breaks while the situation is unclear:

• Contact the listed administrator and insurer before repairs, if possible
• Get a written diagnosis and estimate
• Keep the failed parts if the shop allows it
• Save receipts for anything you pay out of pocket, in case you can seek reimbursement later

How to reduce the risk next time

When shopping for a new plan, ask:

• Who is the obligor, and is the contract backed by an insurance policy?
• How long has the administrator been handling claims?
• Is the company licensed or registered in my state, if my state requires it?
• What happens to my contract if the company is sold or closes?

Read the contract, not just the marketing, before you pay. Our FAQ covers more questions about how plans are structured.

How Warranty Wizards can help

Warranty Wizards is not an insurer, obligor or administrator. We help you compare plans from third-party providers and explain what a plan covers, and who stands behind it, before you buy. To see your options, get a free quote.