What is Product Warranty Insurance

What is Product Warranty Insurance?

When a seller or manufacturer (OEM) wish to offer a longer product warranty but do not wish to retain all of some of the liability they seek options for Product Warranty Insurance. For a single defined cost the company purchases coverage to transfer the risk to a third-party obtaining balance sheet relief.

This is an easy solution to offer a longer limited warranty on a promotional basis or for selected products. The transaction is between the company and the third-party and the end customer has no impact. In most cases, the company still takes care of the customer experience and manages the claim process just like under the "normal" warranty term. The company doesn't need to pay an administration fee or processing fees or go through multiple layers. This streamlines the costs for the company.

Depending on the product type, coverage exists for parts, labor, or parts & labor. The term includes a limited OEM or seller warranty retention, and then the liability falls to the third-party. The obligations for the warranty or service contract are insured by a contractual liability insurance policy or other structure.

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