Whether you’re purchasing a vehicle service plan at the dealership or from a third party, you should have the information needed to drive an informed decision. There’s a reluctance on the part of most sellers to be transparent when it comes to pricing — and severe limitations on how you can customize your plan to meet your driving habits and budget needs. But there’s a better way…
Pricing for vehicle service plans is similar to other insurance products that you may be familiar with, but there are important differences that you need to understand. These differences may impact the type of coverage you purchase. Luckily, ForeverCARE is here to clear it up. Here’s how we demystify pricing.
How Plans Are Priced
The core price is based on underwriting risks using certain criteria about your car — primarily year, make, model and mileage. Similar to many other insurance products, vehicle service plans rely on large pools of risk to make sure there’s enough money to pay off claims. This portion of the price, typically referred to as the premium, is used to pay claims and varies greatly depending on the age and type of car you drive. It also changes based on the type of coverage you select and the length of the coverage.
The other variable in determining the premium is the deductible amount. This typically ranges from $0 to $500 and is charged per claim. There is no minimum/annual deductible threshold you must meet before claims are paid. It’s simply the amount of the deductible that you selected, paid on a per-claim basis.
Next, add the cost to insure the performance of the contracts from an AM Best A rated carrier. This fee is called a Contract Liability Insurance Policy, or CLIP. The CLIP provides extra assurance that your contract will remain in force and your claims will be paid even if the plan administrator goes out of business.
Adjusting Your Quote
Make sure you can easily customize your price by changing various aspects of the plan yourself. While it may be tempting to reduce the level of coverage to meet your monthly budget, this should be a last resort. Try to find a shorter term or a higher deductible first. If that doesn’t solve things, select a lower-tier plan, but make sure you read the coverage details very carefully. In certain cases, selecting lower-tier coverage eliminates critical items from what’s covered. In many cases, the risk of paying for a repair that’s not covered isn’t worth the few dollars you save every month.
Education is the first step to peace of mind. ForeverCARE is leading the way in transparency and educational content by removing the hassles of car repair. In addition to providing weekly blog content, ForeverCar recently released our “Buyer’s Guide - How to choose a vehicle service plan and remove the hassle of car repairs.” The guide is free to the public and is THE place to start when shopping for a vehicle service plan. After you read the guide, choose the ForeverCar Vehicle Service Plan that fits your needs. Remove the hassle of car repairs and get back to what really matters.