A large number of the service contracts sold online (or over the phone) arehorrible products, without any real financial backing. We’ll go into detail on
this, but basically, they are not backed by an insurance company, or arebacked by such a wafer thin layer of insurance, that it will do you little or no (^)
good if the company selling the contract goes under. Good contracts arebacked by an insurance company, referred to as the obligor.
contract language.TIP: Look for “Party Obligated to Perform” or “Obligor” in the^
obligor |ˌäbliˈgôr|
noun (procedure.Law) - a person who is bound to another by contract or other legal
There should be a clause following the “Obligor” that states the customercan file a claim directly with an insurance company if the original obligor
doesn’t pay the claim within a certain amount of time (that’s if the originalobligor is not the actual insurance company to start with).
A service contract that is truly backed by an insurance company is whatyou should be looking for, and that’s the type I’ve always gotten for my
clients. At the other end of the spectrum is a risk retention group, or “RRG,”which is basically a corporate structure (C-corp., LLC, etc) set up in certain
low-regulation states or offshore. At its heart it is a big savings account,generally with a minimum of $250,000 in it. It has an administrator, which (^)