Clearly, the effect of a failure will depend on the circumstances. For example, breakdown of a car can have serious consequences for travel you have planned and breakdown of a washing machine can cause considerable extra work. Breakdown of a toaster is a minor inconvenience, though.

When you buy something new, the law requires it to be up to the job you will ask of it (for example, the Sale & Supply of Goods Act). Usually, the manufacturer or retailer guarantees it for a time, generally a year at least and, in some cases, longer. Some manufacturers provide longer-term guarantees on parts, but not labour costs. You should make sure you know what guarantee is provided free when you buy and what is covered.

So you can expect to have several years' service from a modern car or household appliance, but faults sometimes develop even in the best equipment and, when this happens after the guarantee period, you will have to arrange for the repair yourself and pay for it, or buy a replacement.

HOUSEHOLD APPLIANCES

Policies Available

Although probably most thought of as applying to televisions, video equipment, audio systems, washers and dryers and fridges and freezers, these policies can cover virtually every appliance in the home, from central heating boilers to computers. They meet the cost of dealing with breakdown.

Some policies provide additional benefits, such as accidental damage or frozen food spoilage, although these may be covered by your home contents insurance.

New Equipment

For new appliances, you can buy cover that lasts for a number of years, usually a maximum of four. Cover starts after the free guarantee expires.

By buying one of these insurance products you will know that whatever happens to future repair charges, you will have insurance protection for a known time. Cover may not be exactly the same as the manufacturer's guarantee, but it is broadly similar.

How to Obtain Cover

When you buy new equipment, the retailer will give you information about policies he sells. Often, cover is available from the manufacturer; the retailer may be able to provide you with details of these policies as well. Details may also be enclosed with the equipment or sent to you when you return the guarantee registration card.

Cover may also be available direct from specialist insurers, insurance brokers or from banks or other financial institutions who lend you money to buy the appliance.

Older Equipment

When extended warranty insurance on certain appliances expires, you may be given the opportunity of renewing cover for periods of twelve months.

You may also want to obtain breakdown insurance for appliances you already own but which are not currently insured. Insurance companies can offer cover on these, subject to their age and provided they are currently in working order. It is usual for a waiting period to be imposed - perhaps 30 days - during which claims will not be met.

Premiums are usually paid annually, but sometimes quarterly or monthly options are available.

How to Obtain Cover

Your existing insurer will write to you with an offer of renewal if you already hold a policy for the appliance. They may also invite you to extend cover to other appliances you own.

Again, cover may also be available from specialist insurance companies, insurance brokers, banks or other financial institutions.

What Is Covered (All Equipment)

Policies will pay the cost of repair following breakdown of components or failure due to faulty manufacturing or faulty materials. Most policies will pay for parts and labour, but some only pay for parts. Policies will usually have a maximum amount payable during the life of the policy and some may have a limit on any one claim. You may have to pay the first part of each and every claim. This is known as an "excess".

Where a repair cannot be done, some policies will replace the whole machine with a new one of similar specification, or pay a cash equivalent if such a machine is not available any more. These are often called "new for old" policies. Other policies will only make good up to the current value of the product after depreciation.

What Is Covered (All Equipment)

Generally, there are a few exclusions in these policies. As you would expect, they exclude misuse and abuse and non-domestic use, some components, and cosmetic items such as damaged paintwork or trims. Consequential losses, such as water or fire damage, are not covered, as your home insurance will probably meet these claims.

How to Claim

Refer to the claims procedures in the policy before you arrange repairs. These will give you full details of how to claim and what to do.

Some policies will ask you to pay the repairer and send the invoice to the insurer for reimbursement; others pay the repairer direct.

PRIVATE CARS AND OTHER MOTOR VEHICLES

Policies Available

A wide range of mechanical breakdown policies exist, designed to protect you against the costs of sudden and unforeseen failure of specified components.

The components covered may vary according to the age and mileage of the vehicle, ranging from policies that provide wide protection on new or very young used vehicles through to more limited covers for older or higher mileage vehicles. In some cases, you may be offered the choice of cover for the vehicle you are buying. Generally, if you choose the policy which covers a wide range of components, it will be more expensive than one with a restricted list.

Cover

The policies usually pay for both parts and labour charges incurred in the repair or replacement of an insured component following failure. Cover applies strictly to the failure of specified components only; if the component is not listed for cover in the policy, the claim will not be paid.

Policies will often have a maximum amount payable for any claim; this may range from a few hundred to a few thousand pounds. You are advised to check the adequacy of these limits in view of the cost of breakdown for major components. Some policies have a betterment clause, in which case you would have to pay something if your vehicle was improved following repair. They may also have a maximum amount payable during the life of the policy. There may be an excess that you will need to pay yourself if you have to make a claim. Some components may have specific claim limits or excesses applied as well.

These policies are not maintenance contracts and do not cover breakdowns that arise through normal wear and tear. This is because some components will require replacement during the expected life of a car as part of the regular servicing that the manufacturer recommends. The insurer protects you against unexpected failure. The policy should make these points clear.

For new cars, cover is usually offered for an additional 12 or 24 months after the manufacturer's guarantee expires, but longer periods of cover are available on some vehicles.

For used cars, periods of cover offered will vary from 3 to 36 months from purchase.

Sometimes, policies include a mileage limit and cover will cease if this mileage is exceeded while the policy is in force, so you need to consider carefully whether this limit will be enough for your expected use of the vehicle.

Additional Benefits

Mechanical breakdown policies may also include additional benefits, such as towing-in charges or a contribution to the cost of a replacement vehicle during repairs.

These benefits only apply in conjunction with a valid mechanical breakdown claim and are often subject to separate conditions and limits. In some cases, though, the policy claim limits will include payments made under the additional benefits section of the policy.

Conditions and Servicing

All insurance policies require you to comply with conditions and, if you fail to do so, claims may be refused. Most mechanical breakdown policies require the vehicle to be serviced, by an authorised dealer, at intervals laid down in the policy. This is a crucial condition of the policy and the policyholder is entirely responsible for making sure that correct servicing is carried out at the intervals specified.

How to Obtain Cover

When you buy a new car through a dealer, you will get details of the policies they offer. Cover may also be available from the manufacturer and the dealer may be able to provide details of this too.

For a used vehicle, the cover available will depend on the age and mileage. Your dealer will be able to provide details of the policies he has for sale.

Cover is also available from some insurance companies, brokers, motoring organisations, banks or other financial institutions (especially if you are borrowing money to buy the car).

Some mechanical breakdown insurances have an option to renew the cover for 12 months when your policy runs out.

How to Claim

The policy will include a detailed claims procedure that must be followed.

Breakdown or warranty policies are available for a wide range of other items. Office machinery, yachts, earth moving equipment, fitted kitchens and household furniture are all examples where policies are available. The basic principles of cover are similar to those provided for household appliances and cars, but the policies may have different specific conditions.

Codes of Practice

There are three Codes of Practice which are relevant to extended warranty and mechanical breakdown insurance.

The "Guidance Notes on the General Business Code of Practice" which seeks to ensure that good selling practices are applied by insurers.

Other relevant Codes of Practice are the British Retail Consortium Code of Practice for extended warranties on electrical goods and the Society of Motor Manufacturers and Traders' Code of Practice for mechanical breakdown insurance schemes which both cover a range of matters including insurance.

You can obtain details respectively from The Association of British Insurers, 51 Gresham Street, London EC2V 7HQ; The British Retail Consortium, Bedford House, 69/79 Fulham High Street, London SW6 3JW; the Society of Motor Manufacturers and Traders Limited, Forbes House, Halkin Street, London SW1X 7DS.

Further Information

All insurance policies are important documents. Read your policy carefully as soon as you receive it. If you do not understand, you should ask the person who sold you the policy, or the insurer, to explain.

You may also wish to check that the insurer is a member of the Insurance Ombudsman Bureau or the Personal Insurance Arbitration Service. These bodies can help you if you have a dispute about the insurance that you cannot resolve. Your policy will have details of the procedure.