Stated Component or Inclusionary Powertrain Contracts
Powertrain extended service contracts cover the engine, transmission, and other parts of the drivetrain only, which is defined as the parts of the vehicle through which oil flows. These are the parts least likely to fail, but expensive if they do. The average vehicle contains over 9,000 mechanical and electrical parts. As it does not cover the majority of the components of a vehicle, a powertrain extended service contract provides very limited protection.
Stated Component or Inclusionary Contracts
As the name implies, stated component coverages will provide a list of parts that are covered. Few vehicle service contracts cover all repairs. "Stated component" or "Inclusionary" contracts typically cover the major mechanical systems of the vehicle from the mechanical breakdown and mechanical failure. These contracts typically include the engine, front and rear suspension, fuel system, some interior/exterior components, front and rear drive axles, cooling system, brakes (including ABS), transfer unit (4 X 4's), seals and gaskets, electrical system, transmission, air conditioning, turbo charger, electronic systems and steering systems.
Not surprisingly "Stated component" or "Inclusionary" extended service contracts sellers focus attention on the stated or named components. Does coverage that includes the engine, transmission, suspension, steering, front- & rear-wheel drive and brakes sound comprehensive? If so, consider what would happen should you have a problem with the electrical components. If an item isn't listed, assume it's not covered. Further, watch out for absolute exclusions that deny coverage for any reason.
Exclusionary: Bumper-to-bumper or Comprehensive Contracts
Exclusionary extended service contracts are generally more comprehensive and take the opposite approach to coverage. That is they identify the specific components that are not covered. Take the time to review these components to ensure you are not left with undue risk of repair cost.
They cover nearly all of the mechanical systems of the vehicle, from front bumper to back bumper; except for those on the "exclusion list", listing the parts that are NOT covered by the contract. It is much easier for a consumer to see a short list of items that are not covered and know that everything else is. Consumable items, such as brake pads or windshield wipers, are usually not covered. Roadside assistance plans are typically offered as part of the warranty package, and even while the basic warranty is still in effect. Some even offer free lodging and meals if your vehicle breaks down on a trip.
Things to consider in both types of contracts
If the extended service contract specifies that only "mechanical breakdowns" will be covered, problems caused by "normal wear and tear" may be excluded. Therefore, in the case above, should the coverage provided be only for breakage, what would happen if a seal or gasket wore out?
Breakdown vs. Wear-and-tear: All extended service contracts cover parts that break. More comprehensive warranties also cover parts that wear out prematurely. Breakdown-only products will increase the number of failures you have to pay for yourself, even though they may have lower prices.
Overheating: Some extended service contracts do not cover breakdowns resulting from engine overheating. Though service contracts with this type of exclusion will be less expensive to purchase you can be left with major expenses later on.
Payment caps: While all extended service contracts include caps on lifetime payouts, some have additional caps (for example: “transmission replacement not to exceed $4,000”). Though service contracts with this type of exclusion will be less expensive to purchase you can be left with major expenses later on.
Benefits: Many extended service contracts include benefits such as roadside assistance, towing, trip interruption coverage and rental car coverage.
Repair payments:Many extended service contracts are set up so that the administrator pays the repair facility directly by corporate credit card.
Repair facility: Many extended service contracts allow the policyholder to choose where to have repairs done (e.g., dealer, independent service facility).
Transferability/Cancellations: Many extended service contracts allow the transfer of the contract in a private party sale or to cancel the policy for a pro rated refund.
