Guide to Auto service contracts

20 The Back up Insurance Company continued Some VSCs have backup insurance from a special kind of insurance company called a “risk retention group.” A risk retention group will always have the words “risk retention group” or “RRG” in its name. A risk retention group may be authorized to provide backup insurance, but it is not actually licensed by the CDI. Because many laws that apply to licensed insurance companies and protect consumers do not apply to risk retention groups, some people recommend that you buy a VSC only if the backup insurance company is actually licensed by the CDI, and not if the backup insurance company is a risk retention group. To find out whether an insurance company is licensed by the CDI, check the “Company and Agent/Broker Information” page of CDI’s website ,www.insurance.ca.gov or call the Department’s toll-free phone number, (800) 927- 4357. What about New Car Warranties? Many car repairs are covered by the new car warranty that comes automatically, free, when you buy a new car. New car warranties are issued by the car’s manufacturer. They vary in their duration and in the parts they cover. Most new car warranties cover the major parts of your car for several years. If a covered part breaks during the term of a new car warranty, the warranty (not a VSC or MBI policy you brought) will pay for the repair. Seriously defective new cars may be covered under California’s “Lemon Law”. The Lemon Law does not apply to used cars. You can obtain more information about the Lemon Law in the “Resources” section of this Guide.