Q. What is a Service Contract?
A. Service Contract is defined as a contract or agreement for a separately stated consideration for a specific duration to perform the repair, replacement, or maintenance of property or indemnification for repair, replacement, or maintenance, for the operational or structural failure due to a defect in materials, workmanship, or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances including, but not limited to, towing, rental, and emergency road service. Service contracts may provide for the repair, replacement, or maintenance of property for damage resulting from power surges and accidental damage from handling. §38.78.20(12)
Q. What is a Warranty?
A. Warranty is defined as a warranty made solely by the manufacturer, importer, or seller of property or services without charge, that is not negotiated or separated from the sale of the product, that is incidental to the sale of the product, and that guarantees indemnity for defective parts, mechanical or electrical breakdown, labor, or other remedial measures, such as repair or replacement of the property or repetition of services. §38.78.20(14)
Q. What is a Provider?
A. A provider is defined as a person who is contractually obligated to the service contract holder under the terms of the service contract . §38.78.20(9)
Q. Who is exempted from having to apply for a service contract provider license?
A. This chapter does not apply to 1) warranties; (2) maintenance agreements; (3) commercial transactions; (4) warranties, service contracts, or maintenance agreements offered by public utilities on their transmission devices to the extent they are regulated by the Public Service Commission or the Department of Health and Environmental Control; (5) service contracts sold or offered for sale to persons other than consumers. (C) Motor vehicle manufacturer’s service contracts on the motor vehicle manufacturer’s products shall comply with Sections 38‑78‑50 (A) and (D), to (N), Section 38‑78‑60, and Section 38‑78‑100, as applicable. (D) The types of agreements referred to in subsection (B) of this section do not have to comply with any provision of the insurance laws of this State. §38.78.10
Q. What is the license fee for a contract service provider registration?
A. The registration fee is $200 dollars annually. §38.78.30 (c)
Q. Are there any financial requirements for service contract providers?
A. Yes. Service contract providers may choose any of the following to meet it financial obligation in this state. (a) Reimbursement insurance policy; (b) funded reserve account; (c) its parent’s net worth (must maintain $100 million dollars) §38.78.30
Q. Are the fees collect by the contract service provider subject to premium taxes?
A. Provider fees collected on service contract are not subject to premium taxes. §38.78.30(h)
Q. What are the requirements of a service contract provider insuring service contracts under a reimbursement policy
A. Reimbursement insurance policies insuring service contracts issued, sold, or offered for sale in this state shall state the insurer that issued the policy and shall state the insurer’s name and address.
Q. What are the requirements of a service contract provider insuring service contracts not covered under a reimbursement policy?
A. Service contracts not insured under a reimbursement insurance policy shall contain a statement stating, “Obligations of the provider under this service contract are backed by the full faith and credit of the provider.” §38.78.50(c)
Q. How long should a service contract provider preserve its records?
A. The provider should preserver its records for a period no less than one year after the specified period of coverage has expired. §38.78.70(4)
Q. What are the procedures if a contract service provider cancel its reimbursement policy?
A. The insurer that issued the reimbursement insurance policy may not terminate the policy until a notice of termination in accordance with Chapter 75 of the SC Code of Laws and has mailed or delivered to the Department. §38.78.80
Q. This there a free look period in a service contract?
A. Yes. The service contract holder has twenty days to review the service agreement and may return the contract to the service contract provider for a full refund. §38.78.30(f)
Q. Are there any required language that must be disclosed in the service contracts?
A. Yes. Service contracts marketed, issued, sold, or offered for sale should be easy to read and must disclose the requirements set forth in Section 38-78-50. In addition, the Department requires that all service contract providers disclose the Department’s name and address regarding disputed claims on their contracts. §38.78050
Q. Is a service contract an insurance policy?
A. No. Service contract providers are restricted from using the word “insurance” in the contract. The agreement is not an insurance contract. §38.78.60
Q. Can a bank or lending institution require the borrower to purchase a service contract as a condition of a loan?
A. No bank, saving an loan association, lending institution, manufacturer, or seller of any product shall require the purchase of a service contract as a condition of a loan or a condition for the sale of any property. §38.78.60(c)
