The words this industry uses

Service contracts are hard to compare partly because the vocabulary is doing work. These are the terms that decide claims — defined plainly, including the ones that work against the seller. None of it is specific to a US Auto Protect plan; the numbers that apply to you are in your contract.

A

Administrator

The company that runs the contract day to day and authorizes claims.

When your shop calls for authorization, they are calling the administrator. The administrator decides whether a failure is covered, what the contract will pay, and pays the shop. The company that sold you the contract and the company that administers it are often different — worth knowing before you buy, because the administrator is who you will actually deal with when something breaks.

Aftermarket and reconditioned parts

Non-original parts a contract may use for covered repairs.

Many contracts allow parts of like kind and quality — aftermarket, remanufactured or used — rather than new original-manufacturer parts. This is normal and usually fine, but if you specifically want OEM parts, that is a question to ask before buying rather than at the counter.

B

Betterment

A reduction in what the contract pays because the repair leaves your vehicle better than before.

Applies most often to wear items with a measurable service life. If a part was most of the way through its life when it failed, a betterment clause lets the administrator pay a proportion of the replacement rather than all of it, and you pay the rest. Not every contract has one.

C

Cancellation and prorated refund

Ending the contract early, and what you get back if you do.

Contracts are generally cancellable. Within an initial window a full refund is common; after it, refunds are usually prorated by time or mileage, sometimes less an administrative fee and any claims already paid. Your rights here are set by the contract and by the law of the state where you bought it, so the answer genuinely varies.

Claims authorization

Approval from the administrator, obtained BEFORE any teardown or repair begins.

The single step that decides more denied claims than any coverage question. The shop diagnoses the problem and calls the administrator for an authorization number before starting work. Repairs begun without it can be denied even when the part was plainly covered. If a shop tells you they will 'sort the paperwork later', stop and call first.

Component group

A bundle of parts covered together, like Engine or Drive Axle.

Plans are usually sold as sets of component groups rather than individual parts. The catch worth understanding: a part can appear in more than one group, and is only covered under the group where the contract specifically lists it. If a plan covers Engine but not Cooling System, a water pump may or may not be covered depending on which group the contract puts it in.

Consequential damage

Damage caused to a covered part by the failure of a part that was not covered.

The clause that surprises people most. If an uncovered component fails and destroys a covered one, many contracts will not pay for either. It is one of the sharpest differences between two plans that otherwise look identical, and it is worth asking about specifically.

Covered breakdown

A listed part failing to perform its normal function — not from accident, misuse or neglect.

The event a contract is designed to pay for. It is narrower than 'my car broke'. Damage from a collision, from running out of oil, from a modification, or from an unrelated failed part is generally not a covered breakdown even when the failed part itself is on the covered list.

D

Deductible

The part of a covered repair you pay yourself.

The contract pays the covered amount less your deductible; you settle the deductible with the shop. Two structures exist and the difference is worth asking about: per-visit, where you pay once no matter how many parts were fixed, and per-repair, where you pay once per failed component. A single visit fixing three covered parts can cost three times as much under a per-repair deductible. The amount and structure that apply to you are stated in your contract.

Diagnostic fee

What the shop charges to identify the fault.

Commonly reimbursed when the resulting repair is covered, and commonly not when it is not. Worth confirming, because diagnosis on modern vehicles is not a trivial cost.

Drivetrain

The parts that deliver power to the wheels — transmission, driveshaft, axles, differential.

Often used interchangeably with powertrain in advertising, though strictly drivetrain excludes the engine itself. Because the two words get used loosely, check which components the contract lists rather than which word it uses.

E

Exclusion

Anything the contract specifically will not pay for.

The most important section of any service contract and the first one worth reading. Common across the industry: routine maintenance, wear items with a designed service life such as brake pads, filters and bulbs, cosmetic damage, rust and corrosion, damage from missed maintenance, and anything already broken. A provider reluctant to show you this section before you buy is telling you something.

Exclusionary contract

Covers everything except a listed set of exclusions. Usually the broadest coverage available.

Also called exclusionary-style. The contract lists what is NOT covered, and everything mechanical that is not on that list is covered. This is generally the strongest form of coverage, and the exclusion list is short enough to read in a few minutes — which is exactly why you should read it.

Extended warranty

The everyday name for a vehicle service contract. Technically a misnomer.

Almost everyone says extended warranty, including people who sell service contracts. The distinction matters in one situation: when you are comparing documents. A manufacturer's extended warranty is backed by the carmaker and honored at their dealers. A service contract is backed by an administrator and obligor, and honored wherever the contract says. Neither is automatically better — but they are not the same paper.

L

Labor rate and labor guide

What the contract will pay per hour, and how many hours it allows for a given job.

Two separate limits. A contract may cap the hourly rate it pays, and it will usually pay the hours a standard labor guide allots to that repair rather than the hours actually taken. If your shop charges more than the capped rate, the difference is typically yours.

O

Obligor

The party financially responsible for paying your claims.

Named in the contract, usually on the first page, and the single most useful thing to look up before buying. The obligor is who is on the hook if claims must be paid — sometimes the administrator, sometimes an insurance company standing behind them. A contract whose obligor is an insurer regulated in your state is a different risk from one that is not.

P

Powertrain

Engine, transmission and drive axle — the parts that make the car move.

The narrowest common coverage level and usually the cheapest. Powertrain failures are the most expensive ones, which is why even basic plans start here. It excludes a great deal: air conditioning, electrical, suspension, brakes and cooling are all outside powertrain unless separately covered.

Pre-existing condition

A fault that existed before coverage started. Never covered.

Universal across the industry, and the reason waiting periods exist. If a problem can be shown to predate the contract — including a symptom you had noticed but not repaired — it is excluded. This is also why buying coverage while the car is healthy costs less and covers more than buying it once something is already wrong.

R

Rental reimbursement

A daily allowance toward a rental car while yours is being repaired.

Almost always a per-day allowance with a maximum number of days, and almost always tied to a covered repair — not to any time your car is in a shop. On a long repair the cap is what matters, so compare the daily figure and the day limit rather than the presence of the benefit.

Roadside assistance

Towing, jump starts, lockout and flat-tire help, usually bundled with a plan.

Commonly included rather than sold separately, and commonly capped — per event, per year, or by distance. Useful, but rarely a reason on its own to choose one plan over another. Check whether you already have it through your insurer or card before paying for it twice.

S

Seals and gaskets

The parts that keep fluids where they belong. Often covered conditionally.

Frequently sold as an add-on or covered only in higher tiers, and often with a distinction between a seal that fails outright and one that seeps. Because seal work usually means significant labor to reach the part, whether they are covered can matter more than the part price suggests.

Stated-component contract

Covers only the parts specifically named in the contract. Anything unnamed is not covered.

Also called inclusionary or named-component. The contract lists the covered parts, and if your failed component is not on that list it is not covered — even if it seems obviously related to something that is. Most lower-priced plans are stated-component. The list is the product, so compare lists rather than plan names.

T

Teardown

Disassembly needed to find out what actually failed.

Sometimes the cause of a failure cannot be identified without taking an assembly apart. Contracts usually require authorization before teardown, and if the eventual finding is not covered, the teardown cost is generally yours. Ask who carries that cost before authorising the work.

Transfer

Passing remaining coverage to a private buyer when you sell the vehicle.

Most contracts are transferable to a private party, which can raise what the car is worth at resale. Conditions and any fee are set out in the contract, and there is often a short window after the sale in which the transfer must be requested — worth checking before you list the car, not after.

V

Vehicle service contract

An agreement that pays for covered mechanical repairs after your factory warranty ends.

The product this industry actually sells. You pay a set amount over time, and when a covered part fails the contract pays the repair bill less your deductible. It is not insurance — insurance covers collision and damage, a service contract covers mechanical breakdown. Strictly speaking only a manufacturer can extend a warranty, so what independent providers sell is always a service contract, whatever the advertising calls it.

W

Waiting period

A short window after purchase before claims can be made.

Standard across the industry. It exists to stop contracts being bought to pay for a failure that has already happened. Both a time and a mileage figure usually apply, and the ones that apply to you are stated in your contract — ask before you buy so there is no surprise in week one.

Wear and tear

Gradual deterioration from normal use, as distinct from a sudden failure.

Some contracts cover a part only when it breaks, not when it simply wears past a tolerance — a distinction that decides plenty of claims. Seal and gasket seepage is the classic example and is commonly excluded as wear rather than treated as a breakdown. If a plan advertises 'wear and tear coverage', ask what it does and does not include.

Still not sure what you're reading?

Send us the contract you're comparing — ours or anyone else's — and we'll walk you through what it actually covers.

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