Service
Contracts
Service contracts, also known as extended warranties, hold out the promise of peace of mind for boat owners once the manufacturers’ warranties expire. Whether they actually make good on that promise is another story.
Bear in mind that extended service contracts are not warranties, but repair insurance policies administered by independent companies. As such, they do not create a legal obligation for manufacturers to assist with repairs or make good on defects. In fact, the contract is probably administered by a company that has no interest in keeping you happy as the owner of a specific make of boat or engine. Instead, the company is betting that making necessary repairs will cost them less than what you pay for the contract — otherwise, they wouldn’t be in business.
Before signing on the dotted line, take some time to find out exactly what is being offered and whether a service contract is really going to be much help to you. Ask to see a copy of an actual contract, not just the promotional brochure, and pay special attention to the exclusions sections. You may be surprised at what’s not covered.
Consider the following:
• Service contracts
are no bargain. The cost to the consumer is often marked up 100% or higher
to pay the sales people involved;
• Does the contract seem expensive compared to the cost of what
it’s covering? Contracts should not cost more than 10% to 15% of
the value of what they cover;
• The coverage period may actually overlap with the original manufacturer’s
warranty. Buy service contracts as far into the warranty period as possible,
to avoid overlapping coverage;
• An independent company may go out of business and you will have
no coverage. This is less likely to happen with contracts sold by engine
or boat manufacturers;
• Most marine engine problems occur within the first 100 hours of
use, usually well within the manufacturer’s warranty;
• Obtain authorization before proceeding with repairs, otherwise
the contract company may deny your claim;
• Does the contract void itself when the pay-out for claims exceeds
the value of the product covered? You could be left with no coverage if
your boat or engine is a lemon;
• Consider an alternative to buying a service contract — try
setting up a special savings account with the amount you otherwise would
have spent. Use this money for major repairs.
• If you do buy a service contract, call the contract company a
few weeks later to confirm that they have received your premium and that
your service contract will be in effect during the period agreed to. A
quarter of all service contract complaints reported to BoatU.S. involve
the dealer’s failure to submit the application and premium.
• Follow the service contract’s requirements for maintenance
and repairs. Be aware that some contracts require that specific shops
perform all maintenance.
Unless you have a dock or the room to store your boat at home, it’s a good chance you will contract for slip space or dry storage at a marina.
Read your storage agreement carefully! Many marinas impose conditions that come perilously close to violating antitrust and restraint-of-trade laws in some states. Here are some of common clauses that may be unfair:
• Repairs and
maintenance — even common do-it-yourself jobs — must be performed
by marina personnel. All states permit marinas to require contractors
to carry substantial liability insurance coverage, but some marinas go
a step farther and prohibit owners or outside contractors from making
repairs.
• When outside contractors are permitted to work at the marina,
the marina tacks a surcharge onto the contractor’s bill for the
“privilege” of doing business on private property.
• Customers are required to purchase all repair materials from the
marina store or must pay extra fees if supplies are purchased elsewhere.
• Owners are prohibited from posting “for sale” signs
on their boats or are required to pay a commission to the marina when
boats are sold — even if the marina has no role in the sale.
• Owners must move their boats when hurricanes or dangerous weather
conditions are imminent. Although marinas may require owners to make their
own arrangements for hurricane protection, some make special arrangements
for preparation and damage protection. Even so, owners may be liable for
damages to marina structures if their boats break loose during a storm.
• Marinas require you to indemnify them in the event of personal
injury or property damage claims. Marinas cannot absolve themselves of
responsibility if someone is injured on shore or if a boat is damaged
due to an unsafe condition, like a problem with the dock’s wiring
system.
• Remember, because slip space is at a premium almost everywhere
in the U.S., this can create an unfair bargaining position for boat owners.
Before signing a slip or storage agreement, read the fine print carefully.
Consult with an attorney, your insurance company or your state’s
consumer protection agency if you can not understand the terms of the
agreement.
