NAIC Model Laws, Regulations, Guidelines and Other Resources—January 1997
© 1997 National Association of Insurance Commissioners 685-5
D. Service contracts shall identify any administrator, the provider obligated to perform the service under the
contract, the service contract seller, and the service contract holder to the extent that the name and address
of the service contract holder has been furnished by the service contract holder.
E. Service contracts shall conspicuously state the total purchase price and the terms under which the service
contract is sold. The purchase price is not required to be pre-printed on the service contract and may be
negotiated at the time of sale with the service contract holder.
F. If prior approval of repair work is required, the service contracts shall conspicuously state the procedure for
obtaining prior approval and for making a claim, including a toll-free telephone number for claim service
and a procedure for obtaining emergency repairs performed outside of normal business hours.
G. Service contracts shall conspicuously state the existence of any deductible amount.
H. Service contracts shall specify the merchandise and services to be provided and any limitations, exceptions
or exclusions.
I. Service contracts shall state the conditions upon which the use of non-original manufacturers’ parts, or
substitute service, may be allowed. Conditions stated shall comply with applicable state and federal laws.
J. Service contracts shall state any terms, restrictions or conditions governing the transferability of the service
contract.
K. Service contracts shall state the terms, restrictions or conditions governing termination of the service
contract by the service contract holder. The provider of the service contract shall mail a written notice to
the contract holder within fifteen (15) days of the date of termination.
L. Service contracts shall require every provider to permit the service contract holder to return the contract
within at least twenty (20) days of the date of mailing of the service contract or within at least ten (10) days
if the service contract is delivered at the time of sale or within a longer time period permitted under the
contract. If no claim has been made under the contract, the contract is void and the provider shall refund to
the contract holder the full purchase price of the contract. A ten percent (10%) penalty per month shall be
added to a refund that is not paid within thirty (30) days of return of the contract to the provider. The
applicable free-look time periods on service contracts shall only apply to the original service contract
purchaser.
M. Service contracts shall set forth all of the obligations and duties of the service contract holder, such as the
duty to protect against any further damage and the requirement for certain service and maintenance.
N. Service contracts shall clearly state whether or not the service contract provides for or excludes
consequential damages or preexisting conditions.
Section 6. Prohibited Acts
A. A provider shall not use in its name the words insurance, casualty, guaranty, surety, mutual or any other
words descriptive of the insurance, casualty, guaranty or surety business; or a name deceptively similar to
the name or description of any insurance or surety corporation, or any other provider. This section shall not
apply to a company that was using any of the prohibited language in its name prior to the effective date of
this Act. However, a company using the prohibited language in its name shall conspicuously disclose in its
service contracts a statement in substantially the following: “This agreement is not an insurance contract.”
B. A provider or its representative shall not in its service contracts or literature make, permit or cause to be
made any false or misleading statement, or deliberately omit any material statement that would be
considered misleading if omitted, in connection with the sale, offer to sell or advertisement of a service
contract.
C. A person, such as a bank, savings and loan association, lending institution, manufacturer or seller of any
product, shall not require the purchase of a service contract as a condition of a loan or a condition for the
sale of any property.