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Q: Warranty vs. Insurance ( Answered,   0 Comments )
Subject: Warranty vs. Insurance
Category: Business and Money
Asked by: stepbruner-ga
List Price: $20.00
Posted: 02 Feb 2006 08:30 PST
Expires: 04 Mar 2006 08:30 PST
Question ID: 440497
What constitutes the technical difference between a warranty and
insurance. I'm looking for a fair (but not outrageous) amount of
detail.  I know that warranties typically are alot easier to put in
place since an "insurance" program requires that you file with the
Department of Insurance.  This process can be costly and take a long
Subject: Re: Warranty vs. Insurance
Answered By: wonko-ga on 02 Feb 2006 12:40 PST
Warranties are contracts governing repair and/or replacement of an
item in the event of damage resulting from ordinary use or faulty
workmanship.  Insurance protects items from hazards, such as theft,
fire or water damage, etc.  In most cases, warranties will not provide
coverage in those situations.

A comprehensive guide to the legal aspects of providing warranties can
be found at: "A Businessperson's Guide to Federal Warranty Law"
Federal Trade Commission

Insurance providers are governed by a separate set of regulations.
"Forming an insurance company first requires you to raise a sufficient
amount of capital to reach regulatory requirements.  Each state has
its own insurance regulations, and you must meet the regulations of
each state you plan to do business in."

"Here is a listing of minimum insurer capital requirements by state:

Association of Insurance Commissioners (August 31,

"Insurance companies" by Wonko, Google Answers (November 10 and 12,

Additional sources:

"Accidents happen. You can't avoid the inevitable. Extended warranties
and care plans offered by computer manufacturers MAY SOMETIMES offer
limited accidental damage coverage, but will not cover against theft."

"Portable Electronics" Safeware (2005)

"10. What is the difference between homeowner's insurance and a homeowner warranty?

Your homeowner?s insurance is hazard insurance, and covers items
damaged in fires, by water, by wind or other covered events. A home
warranty repairs or replaces systems or appliances in your home that
break down from normal wear and tear."

"FAQs" Warrantybynet (2006)

"There is a difference between the warranty and insurance.

 Warranty:  Covers the cost of any repair - meaning the hearing aid IS
repairable (example:  hearing aid suddenly stopped working)
 Insurance:  Covers loss, or damage beyond repair (e.g., dog totally
destroyed the entire hearing aid!)

     It is confusing because normally new hearing aids include both -
a one year's insurance and one year's  warranty (some companies
provide routine two year warranty and insurance coverage).

     After one year (or two if that's the case):

 If your hearing aid stops working, you will be expected to pay the
cost for a regular repair normally between $125-200.
 If you lose your hearing aids, expect to pay the full cost for replacements."

"The Difference Between Insurance and Warranty" Colorado Springs



Search terms: "offer a warranty"; "difference between a warranty and
insurance"; difference between warranty and insurance

Request for Answer Clarification by stepbruner-ga on 02 Feb 2006 14:14 PST
You hinted at the difference in Mortgage Insurance vs. Mortgage
warranty?  I now understand product warranties, but what about
something like a loan?  Say you had a provision that in the instance
you lost your job, your mortgage payment would be paid for a certain
amount of time.  Warranty, Insurance, Other?

Clarification of Answer by wonko-ga on 02 Feb 2006 20:59 PST
A provision like you describe would be a form of insurance.  For
example, Private Mortgage Insurance (PMI) is something a lender will
typically make you buy to protect the lender in case you are unable to
make your payments.  Likewise, you could purchase disability insurance
to provide you with payments if you met certain criteria so that you
could continue to have an income.

Source:  "The basics of private mortgage insurance (PMI) Bankrate,
Inc. (2006)

An example of the type of insurance you describe:  "Consumer Programs"
Genworth Financial (2006)
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