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What Makes Paragon
Motor Club Different?

Extended Warranty Education - Insurance vs. Risk Retention

When you buy an extended warranty from Paragon Motor Club, you can feel confident that your warranty is directly insured by an insurance company that has the financial stability to pay claims today and in the future. Ask us about the differences between an insurance company and a risk retention group when purchasing an extended car warranty.

To compare the differences between an RRG and an insurance company backed warranty provider, please use the table below...

What's the issue?
Insurance Company
Risk Retention Group
What does this mean to me?

Many RRG backed plans offer a "Low cost" extended warranty. RRG backed plans can exist through dealerships, direct-to-consumer marketers and so on. It is important to know if the plan you are researching is backed by an RRG.

Risk Retention Groups are not required to undergo the scrutiny of insurance regulators in each state the RRG is doing business in. They can be established with very little capital and because of their size, some RRG's lack the sophisticated staff needed to ensure that proper reserve funds are being deposited to pay future claims. Most RRG's in the automobile service contract industry have been in business less than 5 years. These same RRG's offer 7-year warranty terms meaning that they have not yet experienced 1 full cycle of claims loss data. RRG's are not eligible for the State Guaranty Fund and offer little protection to the contract holder should they become insolvent. To offer the appearance of security, many RRG's purchase reinsurance. If this is the case, remember that the reinsurance is on the RRG and not the individual contract holder. The reinsurance policy also has policy limits that may not meet the RRG total liability.

While researching an RRG backed extended warranty, investigate their time in business, policy limits, total liability and volume of contracts administered. Remember that lower price sometimes means higher volume and that higher volume may create future liability that exceeds cash reserves and reinsurance limits with little hope of protection for the consumer.