What is a Limited Warranty

A Limited Warranty is a warranty that is provided to a consumer under the Magnuson-Moss Warranty Act.

The Magnuson-Moss Warranty Act is a federal law governing consumer product warranties offered by manufacturers (OEMs) and sellers. The Magnuson-Moss Warranty Act does not require a manufacturer or seller to provide a warranty; however, it defines the requirements if a manufacturer or seller does offer a Limited Warranty.

Under the Magnuson-Moss Warranty Act, manufacturers and sellers of consumer products must provide the consumer with clear and detailed information regarding the Limited Warranty coverage if one is offered. This information directly impacts the rights of the consumer and the obligations of warrantors under the written warranty.

A Limited Warranty is provided at no cost to a consumer by the manufacturer or seller and provided to all consumers purchasing the product in the same manner.

It is important to properly design the Limited Warranty document you provide to the consumer to ensure compliance. Many great resources are available to assist you with designing the Limited Warranty document.

In addition to offering a Limited Warranty, manufacturers and sellers also have the option to offer a Limited Warranty and only retain a portion of the Limited Warranty under their balance sheet. A manufacturer or seller may decide to transfer a portion of the limited warranty risk directly to a third party. In this case, it is an insurance transaction and may be done directly with a carrier operating in this space and may provide balance sheet relief. The following structural options exist for Limited Warranty programs:

  • A manufacturer or seller may retain the warranty risk internally
  • A manufacturer or seller may outsource some or all warranty risk to an insurance carrier for a fixed price
  • A manufacturer or seller may perform consumer-facing warranty claims management internally
  • A manufacturer or seller may utilize a third-party administrator for some or all warranty claims management

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