Under the MVDA, extended warranties must be insured by a company licensed under the Insurance Act, or, if a dealer wishes to sell uninsured warranties, they must provide security to the Motor Vehicle Dealers Compensation Fund.

That security must be in the form of an irrevocable letter of credit in the amount of $100,000 if the warranty provider is also the dealer who sold or leased the vehicle, or $500,000 in all other cases.

If a dealer sells a warranty that does not meet these requirements and the warranty company goes out of business, the dealer is responsible for all claims under the warranty.

All contracts for extended warranties and service plans must include the information set out below and be signed by both parties. Immediately after signing, the purchaser must be given a copy of the contract.

Within seven days of selling a warranty or service plan, dealers must provide the warranty or service plan provider with all documents detailing the contract, all payments the dealer has received from the purchaser and, in the case of an extended warranty, a statement that accurately describes the condition of the motor vehicle and the distance the motor vehicle has been driven, if the dealer has such a statement in its possession.

Click here for a list of Insured Warranty Providers.