Many OEM’s (or sellers, installers) have clients that are requiring a long term limited warranty or service contract secured with strong financial backing to ensure performance of their warranty in the future. This is a simple 5 year example but options also exist for solutions with various terms, elimination periods and coverages.
5 Year Limited Warranty Make-Up Example
The OEM purchases protection for a one-time cost. The protection covers the warranty after an initial retention period and up to 5 years from the date of purchase. The programs are priced on a per unit basis.
In this example, the OEM will hold a retention period of the first 90 days of coverage. Retention periods range from 30 days to 1 year, depending on the structure and product type. After the 90 days the balance of the 5 years is covered by the additional protection and the OEM has shifted the liability off their books. The retention period is designed to ensure the coverage isn’t covering DOA units or units that are improperly installed.
Claims administration is customizable depending on the requirements of the OEM.
In this example the OEM performs all the claims processing and administration under their limited warranty and would essentially continue to utilize the same process going forward – subject to certain requirements.
This is an example only and offers no guarantees of coverages, no accounting advise, no legal advise and no commitments are provided based on the information contained on this website.