Who do we like for auto (drivetrain) warranties?

In reply to alfadriver :

I've had them pay more for repairs than I paid for the warranty. The Toyota Warranty (Service Contract) I mentioned earlier paid out over $19k in repairs vs the $2200 I paid for it over 3 years on an Audi. 

Feedyurhed said:

No personal experience so all second hand from co-workers and friends.  Not one single person had a good experience. So whatever that means. Best advice has already been discussed. What ever the insurance plan would cost put in an account, be ready just in case. Take care of the vehicle, do all required maintenance, minimize chance of issues. Sorry, no big help here just the usual advice.

I'm sure I'm exaggerating and being obtuse, but there are two kinds of extended warranty customers;  Those who hate the experience and got screwed, and those who say they liked the experience because they're afraid to admit the embarrassment of how bad they got screwed.

In reply to Steve_Jones :

Lucky you.  Literally.

That's quite the repair bill, I have to say, though.  Did the entire powertrain seize up?  Have to swap the entire thing?  Seems like a bad car to get used if you could be stuck with a $19k repair bill.  If that were a crash, the car would be totaled.

In reply to alfadriver :

Different repairs at different times. A/C compressor was a big one, Struts were a big one, etc. 

Steve_Jones said:

In reply to alfadriver :

I thought most insurance companies made more on investing the premiums vs shorting the payouts. I've had aftermarket warranties payout more than I paid a few times. 

I'm sure there are plenty of stories like yours, but they have to be incredibly rare.  If they consistently paid out more than they brought in, they wouldn't be a business.

Contrast your situation with mine.  I've been driving for 35 years and paying regular insurance premiums (not extended warranty, but they're basically the same construct) for all that time.  I've made two claims in my life - one for a $3000 repair and one for a $4000 repair.  Contrast that against the (guessing) $20k I've paid them in premiums, and it's a definite win for them.

They do invest premiums, but from what I understand, it's just a small portion of income.  They're not going to get into high-risk investments, so you're likely looking (guessing again) that it maybe yields 5-10%/year?  Not bad, but also not a windfall.  That's at least my understanding.  For instance, if they tried to short Gamestop with everyone's premiums and lost their shirts, then a hurricane hits florida and they suddenly have 235,000 claims to pay and they're not solvent, the SEC would likely lose their nutsack over it.

Yes, insurance companies invest your premiums.  They make money three ways: properly pricing premiums, keeping claims lower than underwritten, and investment income of the premiums.  It's important to understand that most insurance is over a short time period, so the investments are over a short period and therefore are limited.  The big exception is life insurance where the company (usually) holds premiums for decades before it pays out.

Berkshire Hathaway is so hugely successful partly because Warren Buffet bought insurance companies and made excellent investment decisions with the premiums (called float in the industry).