What is a Service Contract Obligor

As you research Service Contract programs, you will hear the term Obligor (aka Provider) as a significant component of the Service Contract process. At the most simplistic level, the Obligor is the legal entity that is issuing the Service Contract and making the promise.

Many states have specific requirements for Obligors, including registration, terms and conditions design & filing, and demonstrating how the Obligor will provide a financial guarantee to back the Service Contract. Each state has its own requirements and varies on a product level, including vehicle service contracts, ancillary auto products, home warranties, and consumer appliances & electronics. Having proper compliance support is very important, and several great options exist to help you with compliance if you choose to form an Obligor.

Forming your own Obligor is not necessary if you wish to design an in-house program. Many structural options exist to take control of the consumer-facing elements while using a third party for the regulatory side and not impacting revenue recognition. This streamlines a program, removes unnecessary costs, and allows the Retailer or OEM to control the customer experience for enhanced lifetime value. It is important to pick the right third-party partner for your business based on mapping out your objectives and the third party's expertise.

WarrantyResources.com is a property of Personal Safeguards Group, LLC. Contact Us with any Questions.