Another Failed Aftermarket Car Warranty Company

According to this Star Tribune article, the company Ultimate Warranty has essentially gone out of business and has left 137,000 people across the United States and Canada holding worthless car warranties.

In October the company filed a claim with its insurer, the Capital Assurance Risk Retention Group, to cover the warranties. The size of that claim had the potential to collapse Capital Assurance, which prompted South Carolina insurance regulators to put it in receivership, a process similar to a bankruptcy.

The South Carolina regulators are trying to get those who sold these policies (dealers, agents and finance companies) to cover the repair costs of the policy owners. Dealers made from one-tenth to more than half of every premium they sold. Also, many dealers in Minnesota were selling these Ultimate Warranty policies even though Minnesota had banned Ultimate Warranty from doing business in the state.

The article describes one person who had paid $1,600 for an extended warrany for his Dodge Durango. His dealership is offering to cover half of any repairs.

Dealerships Don't Always Sell a Factory Manufacturer-Backed Warranty

This is an important point that I mentioned in this previous post. Buying an aftermarket warranty from a dealer is no better than buying it online except that a reputable dealership may at least agree to cover some of the repairs at their own cost. So don't be pressured into extended warranties at the dealership. I list some safe alternatives to extended warranty contracts such as Geico's Mechanical Breakdown Insurance in this post.