Idaho: a vehicle service contract must be backed by an insurance policy, and providers are not required to obtain a Title 41 license

Idaho's Motor Vehicle Service Contract Act (Idaho Code Title 41, Chapter 62) requires a policy from a qualifying insurer behind each contract, prescribes what the contract must say, and says providers are not required to obtain a license under Title 41. This page sets out what the statute's text provides.

The short answer

Backing: no motor vehicle service contract may be issued, sold or offered for sale unless the provider is insured under a "service contract liability policy." The insurer must hold at least $15,000,000 in surplus and paid-in capital, or at least $10,000,000 with a ratio of net written premiums to that capital of no more than 3 to 1.²
Direct claim: the contract must say that if the provider fails to pay or provide service within 60 days after proof of loss is filed, the holder may claim directly against the insurance company, and must name the insurer with a toll-free claim number.³
Cancellation: the contract must state a right to cancel within 30 days of purchase, if no claim has been made, with a refund of the retail price less any stated cancellation fee of no more than $50, and a pro rata refund at other times.³
No Title 41 license, no guaranty fund: providers, and persons marketing, administering, selling or offering to sell for them, are not required to obtain a license under Title 41, and the Idaho insurance guaranty association act does not apply to these contracts.⁷ ⁸

What counts as a motor vehicle service contract

The Act defines a motor vehicle service contract as a contract "given for separately stated consideration" that undertakes to perform or provide repair or replacement service, or indemnification for it, for the operational or structural failure of a motor vehicle due to a defect in materials or workmanship or normal wear and tear.¹ The definition also covers contracts for tire and wheel road-hazard repair, paintless dent removal, windshield chip or crack repair and key or key-fob replacement.¹

The Act separately defines "mechanical breakdown insurance" as a policy issued by an insurance company authorized to do business in Idaho, and the service contract definition does not include it.¹ Our guide on mechanical breakdown insurance vs. a service contract explains the general difference.

The Act's stated legislative intent is that it provides for Idaho regulation of motor vehicle service contracts offered for sale by any person other than the vehicle manufacturer or its affiliates and subsidiaries. It also states that the Act is not intended to apply to the customary and usual performance guarantees or warranties a manufacturer or its affiliates and subsidiaries offer at no additional charge with the sale of vehicles, to maintenance agreements, or to theft protection programs or their warranties.¹⁰

The backing: a service contract liability policy

Section 41-6204 says no contract may be issued, sold or offered for sale in Idaho unless the provider is insured under a service contract liability policy from an insurer admitted to do business in the state, or as otherwise provided in the section's second subsection.² The policy must provide that the insurer will pay the provider's legally obligated contract sums, and it must conspicuously state that if the provider fails to perform, the insurer will pay on the provider's behalf.²

Two ways an insurer can qualify under § 41-6204(2)
Option	Surplus and paid-in capital	Other conditions in the statute
Option (a)	At least $15,000,000	Annually file the insurer's audited financial statements, its NAIC annual statement and the actuarial certification filed in its home state.²
Option (b)	Less than $15,000,000 but at least $10,000,000	A ratio of net written premiums to surplus and paid-in capital of no more than 3 to 1, plus the same annual filings.²

The statute also says the premiums, or the method of developing them, must be filed with the director of the Department of Insurance for approval. The insurer may not cancel the policy until 30 days' advance notice has been mailed or delivered to each provider, and a cancellation does not reduce the insurer's responsibility for contracts issued before the cancellation date.²

What the contract has to say

Section 41-6205 lists terms a contract must contain before it may be issued, sold or offered for sale in Idaho.³

Required contents of an Idaho motor vehicle service contract (§ 41-6205)
Subject	What the statute requires
Insurance statement	A statement in substantially the form given in the statute: obligations of the provider are guaranteed under a service contract liability policy, and if the provider fails to pay or provide service on a claim within 60 days after proof of loss, the holder may claim directly against the insurance company. The contract must also conspicuously state the insurer's name, address and a toll-free claim number.³
Parties and price	The contract must identify the provider, the seller and the holder, and conspicuously state the total purchase price.³
Claims procedure	If prior approval of repair work is required, the contract must conspicuously state how to obtain it and make a claim, including a toll-free number and a procedure for reimbursement of emergency repairs made outside normal business hours.³
Deductible, coverage and exclusions	The contract must conspicuously state any deductible, and specify the merchandise and services provided and any limitations, exceptions or exclusions. A preexisting-conditions clause must specifically state which preexisting conditions are excluded.³
Transfer and cancellation terms	The contract must state the terms governing transfer, and the terms governing cancellation by either the holder or the provider.³
Guaranty association	A statement in substantially this form: coverage "is not guaranteed by the Idaho insurance guaranty association."³

Cancellation and refunds

The contract must conspicuously state that the holder may cancel within 30 days of purchase if no claim has been made and receive a full refund of the retail price, less any cancellation fee stated in the contract that does not exceed $50. At any other time the holder may cancel and receive a pro rata refund of the retail price for the unexpired term, based on the lapsed months, miles or other measure clearly disclosed in the contract, less cancellation fees stated in the contract that do not exceed $50.³

Before the sale, and in marketing

Before a sale, the provider must give the customer written notice that buying the contract is not required to purchase or obtain financing for a vehicle.⁴ A contract may not be used in Idaho if it violates Idaho law, contains inconsistent, ambiguous or misleading clauses, has a misleading title or heading, or is printed so that a material provision is substantially illegible.⁴

A provider may not use "insurance," "casualty," "surety," "mutual" or similar words in its name, contracts or literature, or a name deceptively similar to an insurance or surety corporation or another provider. False, deceptive or misleading statements, and deliberate omissions of material statements, are prohibited in selling or advertising a contract.⁵ The statute also makes it unlawful for a company to misrepresent, by written solicitation, advertisement or telemarketing, its affiliation with a vehicle manufacturer or dealer, its possession of information about the owner's factory warranty, that its records show the factory warranty is nearing or past expiration, or that the owner must register for a new contract to keep existing coverage.⁵ Our guide on expiring-warranty robocalls covers the federal side of that pitch.

Records, enforcement and what the Act does not do

Providers must keep copies of all contracts issued, each holder's name and address, and claim files, and retain records for at least three years after the coverage period ends. The statute puts a duty on the insurer issuing the liability policy to examine each insured provider's compliance with recordkeeping at least every two years.⁶

Section 41-6209 says providers, and persons marketing, administering, selling or offering to sell contracts for them, are not required to obtain a license under Title 41, and that a provider is not subject to Title 41 provisions not made expressly applicable to it.⁷ Section 41-6210 says the Idaho insurance guaranty association act does not apply to these contracts, and that claims under them are not "covered claims" for the association.⁸

The director of the Department of Insurance may examine providers, administrators, insurers and others to enforce the Act. A company that violates it may, in the director's discretion, be subject to a civil penalty of $1,000 per violation, limited to $25,000 in the aggregate for all like violations. The Act does not create a separate civil cause of action, but it does not preclude a cause of action under the Idaho consumer protection act (Title 48, Chapter 6) or other statutory or common-law claims.⁹

Where this fits in our standard

Section 41-6205 requires the contract to name the insurer, with its address and a toll-free claim number.³ Point 1 of our standard asks whether the contract's terms and exclusions are available in plain language before purchase, point 2 asks about cancellation and refund rights, point 3 asks about state licensing or registration (section 41-6209 says no Title 41 license is required here), and point 4 asks whether a funded-claims mechanism is verified where the state requires one. The Register describes how we apply those checks. This page is a description of a statute, not a finding about any provider.

How to verify this yourself

Read Idaho Code Title 41, Chapter 62 on the Idaho Legislature site, sections 41-6201 to 41-6211 (references 1 to 10).
Find the insurance statement in your own contract. Section 41-6205 requires it to name the insurer, its address and a toll-free claim number.³
The statute gives the director of the Department of Insurance the power to examine providers and insurers, so that is the office to contact with questions about the Act or an insurer named in a contract.⁹
For the federal baseline, see Magnuson-Moss Warranty Act explained.

What this page is not

This is general information about the text of one state's statute, not legal advice. It does not say whether any contract, provider or insurer meets the Act, and it does not cover Idaho law outside Chapter 62. Statutes change; confirm the current text before relying on it.

What to do next

If you hold or are offered an Idaho vehicle service contract, check it against the table above. For general steps, see how to compare vehicle service contracts and how to verify a vehicle service contract provider, or return to the vehicle warranty hub.