When shopping for an extended warranty, the actual contract, where you are to sign your name, is the most important and telling piece of paper work. This outlines exactly what the company promises you, nothing more, nothing less. Outlining what is and is not covered on your vehicle is done in two different ways.

     Most contracts will list the components that are covered. If something breaks on your car and it is not listed on the contract or "in conjuction with" another component, then it will not be covered. Under these contracts, the warranty company has many loopholes they can jump through when it comes to paying you on your claim. Scenario. You are driving one day and your waterpump blows. Subsequently, your car overheats and damages some internals in your motor. You have a warranty and you believe that all costs (besides any deductibles) will be paid for. Do not be surprised if the company approves your claim for a waterpump only, and leaves you on your own for the engine overheating. Same scenario for a timing belt, or belt tensioner. If your tensioner breaks an subsequently causes internal damage to your motor, many times you will be rembursed for a belt tensioner, nothing more.

     Make sure that when you are doing your research, the company has outlined how they handle damages due to a failed component, such as overheating due to the failure of a cooling system component. Some companies offer contracts which are said to cover virtually everything on your car, UNLESS it is stated in the contract that the specific component is not covered. These contracts are what you should be looking for, although they can be pricey, you get what you pay for. Make sure you do not have to much coverage on your vehicle. Coverage should match your car's technology.

     Pre-existing conditions are never covered. You should not try to purchase a warranty after your car is already broken. Usually, the companies have some sort of safety guard built into the contract to prevent this, but sometimes you can purchase a warranty without them inspecting your car. Warranty companies will investigate, using third party agents, any suspesious or costly repairs prior to approving your claim. This is also considered fraud and punishable by law.

     Most warranty companies will be honest and willing to work with their customers as long as their customers and the repair facilities are honest in working with them. The best thing you can do to make sure your claims will be handled properly and effectively is to use a mechanic that you trust, and has worked with your warranty company before. Prior to purchasing a warranty contract, it is wise to ask your mechanic which companies he/she has dealt with in the past, and which companies seem to approve claims most often.