Most claims usually begin with an issue with the car. Ideally, these issues surface after the car has been on the road for some period of time. If there is an issue when you drive off the lot, this will usually qualify as preexisting and the issue should be taken up with the dealer. Once a service contract is purchased, the problem can be anything from the engine overheating to the a/c blowing warm air. Most of the service contracts have extensive coverage so the car can be taken in for service for even the most minor issues.
When a service contract is purchased, there are usually a few options for the deductible. Some contracts have a disappearing deductible where the service contract price has a minor increase to compensate for the lack of a deductible. Typically however, service contract claims have a $100 deductible (this is recommended to minimize unnecessary claims).
Most reputable service contract companies will pay full retail for parts and labor at any ASE licensed service facility. Usually the customer takes the car to the nearest service facility (if your dealership has a service department, lucky you). The service advisor at the service facility usually initiates the claims authorization. The customer pays the deductible and has a few options. One, they can get a ride or two; they can get a rental car. Most policies include rental reimbursement, towing services, and lockout services even travel reimbursement (if they are away from home when the issue arises). These services allow the customer to get the car to a repair facility without causing further damage to the vehicle or unnecessary inconveniences.
The service department will typically take notes from the customer’s complaint and follow the warranty guidelines defined by the terms and conditions within the service contract. These terms may vary depending on the company but during most cases, the mechanic on site diagnoses the problem. The service contract company will then either authorize the claim and initiate the repair or elect to send out an inspector. With a large network of independent inspectors, most companies can have someone on site within 24 hours. This delays the claims process but insures that an independent third party can assess the issue without bias.
If the claim is approved, the service contract company will pay the repair facility either by ACH, check, or credit card. Regardless, they usually pay full retail for parts and service and rental reimbursement if applicable.