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What is an Extended Warranty?
An extended warranty is an additional shield of protection beyond the manufacturer’s warranty. Extended warranty insurance companies take over the maintenance and repair costs after the seller’s warranty terminates, saving customers several hundreds of rupees that would otherwise go into repairs. This allows them to enjoy the product for longer, building brand loyalty.
Why Extended Warranties Are a Must?
With today’s fast-paced lives, the only thing customers want is hassle-free post-sales experiences. Extended warranty offers the peace of mind of financial predictability for purchases as small as a blender or a mobile phone to as big as a vehicle. These add-on protections foster brand loyalty while creating a valuable revenue stream, super-charging growth for the extended warranty insurance company and their business partners.
The global extended warranty market is anticipated to reach $347.26 billion by the end of 2034, growing at a CAGR of 8.92% from 2025 to 2034.
Benefits of Extended Warranty
Extended warranties are a must because they help strengthen customer-seller relationships in several ways:
Advantages of Offering Extended Warranty for Sellers
- Improves customers’ purchase confidence. Longer-term coverage offers a sense of better service and effortless appliance or vehicle maintenance.
- Offering extended warranty creates a revenue channel for sellers and insurance companies to penetrate deeper into the underserved cohorts that may otherwise not purchase any protection for their goods.
- With insurtech-powered collaborations between insurance companies and sellers, extended warranty can be bundled with the purchase itself, making customer acquisition effortless.
- Offering high-quality services builds trust, which drives engagement on traditional revenue channels via cross-selling.
Advantages of Purchasing Extended Warranty for Consumers
- The foremost benefit of an extended warranty is the peace of mind and predictability of financial outlay.
- The little extra cost of getting an extended warranty outweighs the long-term cost savings on maintenance and part replacements.
- Buyers can choose the most suitable coverage and premium plans from among competitive extended warranty offerings from insurance companies.
- Since there is a list of authorised repair workshops and mechanics, the customer does not have to look for a reliable service provider.
How Does an Extended Warranty Work?
An extended warranty covers mechanical and electrical breakdowns after the manufacturer’s initial warranty expires. The warranty agreement lays down the inclusions and exclusions. When an issue arises, the customer may follow one of the following routes:
- Get the repair done from an authorised service centre and contact the extended warranty insurance company to initiate a claim. The insurer may request for the purchase documents and service/repair bills.
- Contact the insurer to get the repair/replacement done, providing proof of the gadget or car purchased, along with extended warranty. The insurer may connect the customer with an authorised service centre and help resolve the problem.
Maintaining clear communication from the stage of selling the warranty is critical to prevent post-sales issues. If the customer knows what they have paid for, they can weigh the potential benefits of using extended warranty against potential expenses.
Convincing Customers to Buy Extended Warranty
Of course, the first step is to collaborate with a reputed insurtech provider to embed insurance offerings, including extended warranty, on your platform. While you can make the customer journey as hassle-free as possible, the biggest challenge is encouraging the customer to opt for the extended warranty. Here’s what you need to do:
Advocate for Extended Warranty
Raising customer awareness is the key to encouraging extended warranty purchases. Educate your customers about the benefits of extended warranty and the fact that cost savings outweigh the expenses in the long run. By clearly communicating the value and maintaining transparency in the extended warranty, you empower customers to make informed decisions and prevent after-sale inconveniences.
Tip: Keep the terms of agreement clear with the insurance companies you collaborate with for extended warranty. Having transparent coverage and exclusion terms and communicating the same to your customers is paramount for friction-free experiences.
Emphasise the Exclusive Benefits
Highlight the perks that come with an extended warranty, such as priority services, cost-free annual inspections, etc. Leverage data to identify customers’ unique pain points and solve them.
Imbibe Flexibility within the Purchase
Allowing customers to exercise control over their purchase is a great way to drive revenue. Offer flexible coverage and premium options. Identifying and covering the most common problems faced by customers is critical to creating a positive feedback loop and a strong loyalty programme.
Address Customers Concerns
Create open communication channels to provide purchase assistance and answer buyers’ queries regarding coverage, exclusions, duration, etc. Making them feel heard creates a sense of safety and drives confidence in the manufacturer and insurance provider.
What if Your Extended Warranty is Not Used?
An extended warranty is much like health insurance. It will not be used if your vehicle or appliances are in great condition and work smoothly. Essentially, that’s a good thing.
While this seems convincing, adding transferability to your warranty can further encourage the purchase. For instance, if the buyer sells the vehicle, they have the scope to pass on the premium liability to the new owner.
Seamless Payment Journeys
Create effortless digital journeys for customers to choose, buy and renew extended warranties. Leverage regional and individual data to identify the preferred payment modes and enable them on your digital distribution platform.
The crux of the matter is that extended warranty is an effective mechanism to enhance customer loyalty and drive revenue. Ensuring flexibility and transparency is key to optimising its benefits.
Frequently Asked Questions
- Is it good to take an extended warranty?
Yes, getting an extended warranty is always a good idea, especially if you want to avoid surprise repair costs after the manufacturer’s warranty ends. It adds peace of mind and long-term savings, especially for high-use products.
- What is the difference between a warranty and an extended warranty?
A standard warranty is provided by the manufacturer for a limited time. An extended warranty kicks in after that period ends and continues covering mechanical or electrical issues.
- How long does an extended warranty cover the product?
The coverage duration largely depends on the product and plan but typically lasts 1–3 years after the original warranty ends. It's a one-time add-on with no yearly renewal needed.
- What is not covered under an extended warranty?
The terms of coverage vary from policy to policy. It usually excludes accidental damage, misuse, cosmetic wear, or issues not tied to mechanical/electrical failure. The exact exclusions are mentioned in the warranty terms.
