As repair costs rise and machinery grows more complex, Mike Medeiros of Assurant explains how customized extended service contracts help equipment owners, dealers and OEMs protect investments, reduce downtime and strengthen customer trust.
Industries like construction, forestry and agriculture are an integral part of the U.S. industrial ecosystem and pillars of the national economy. All rely on heavy equipment to keep pace with domestic investments, meet infrastructure demands and complete projects safely and efficiently.
While these complex machines are essential to productivity, even equipment that is well-maintained is subject to part failures. To prevent cost overruns and critical work interruptions, extended service contracts (ESCs) have emerged as a critical solution for companies and their customers across the industrial landscape.
According to Construction Equipment, U.S. heavy machinery repair costs continue to rise, with more than 40% of fleet managers increasing their maintenance budgets in 2025 to keep aging equipment operational. Considering these dynamics, ESCs are not just optional; they are a must-have that protects investments, fosters productivity, gives customers peace of mind and drives strategic advantage across the heavy equipment ecosystem.
THE COSTS OF DOWNTIME
Owning and maintaining heavy equipment has never been more challenging. A perfect storm of supply chain challenges, inflation and labor shortages continues to increase the cost of parts and repairs. This can be especially detrimental for small businesses that lack the resources to absorb unplanned costs, halting operations for days or even weeks, disrupting project timelines, straining customer relationships and resulting in lost revenue.
In many cases, the cost of a single repair for a covered component can exceed the cost of the actual ESC, highlighting the value of the extended service contract.
CHOOSING THE RIGHT COVERAGE
For companies that rely on the consistent operability of their equipment, selecting the right ESC can be a crucial decision. When evaluating options, however, it’s important to understand that extended service contracts are not one size fits all. Equipment owners looking at coverage must consider the degree of flexibility and customization that the business requires. Here are some critical questions customers should ask when selecting an ESC:
• Does the program include coverage for the powertrain, hydraulics and electrical systems? There are various coverage options to consider, and inclusive plans that include coverage for high-risk components may offer meaningful protection at an affordable price.
• Does the contract offer flexible coverage periods? Matching coverage needs with the intended usage of the equipment can be key for both new and used equipment.
• Does the plan have a deductible? Plans without deductibles can help protect against large out-of-pocket costs for covered repairs and the financial burden on equipment owners.
• How quickly will claims be processed? Working with experienced partners can ensure quick turnarounds, get equipment restored quickly and minimize downtime.
• Does the provider’s claims team have real-world dealership repair experience? That expertise allows educated discussions with service managers while ensuring accuracy in the adjudication process.
• Is the coverage transferable? Transferable ESCs can boost equipment resale value and protect long-term investments.
• Does the program include field repair benefits? Including optional coverage for travel to a worksite can add convenience and value, including during the Original Equipment Manufacturers’ (OEMs’) warranty period.
• Does the ESC reimburse at market rates? Reimbursement for parts at the manufacturer’s suggested retail price (MSRP) and labor at shop rates can be a key contract differentiator compared to many third-party plan offerings.
• Does the provider offer other partnership and participation opportunities, like profit sharing? While many providers compete solely on price, OEMs and dealers should look for a provider with the size, industry presence and financial strength to offer more than simply a product.
STRENGTHENING DEALERS AND OEMS
ESCs are not just a necessity for equipment owners; they can also be a strategic advantage for dealers and OEMs who offer them. Both new and used equipment with a good service plan is more attractive to customers, providing peace of mind regarding the quality of the equipment being sold. It also shows confidence in the equipment’s quality by having an ESC attached, so any required repairs would be covered under the plan if a covered part fails.
Additionally, many service products sold alongside equipment can generate ancillary revenue for the equipment dealer while engendering customer loyalty.
In the digital age, ESCs have also become a strategic tool for dealers and manufacturers to stay competitive by streamlining back-office operations. By simplifying quoting, speeding up enrollment and easing claims management, dealers and manufacturers can save time, lower their overhead, reduce their risk and provide a better overall customer experience.
Beyond equipment protection, ESCs can also play a strategic role in driving business growth. By keeping repair work in-house, dealers and manufacturers can increase parts and service revenue. Beyond that, increasing customer touchpoints can create opportunities for trade-ins and future upgrades.
In a world increasingly reliant on heavy equipment, where machinery has become ever more complex, understanding the intricacies and coverage choices is essential for all parties across the industrial ecosystem. For equipment owners, asking the right questions and selecting the right coverage options can allow the business to function smoothly and efficiently. For dealers and OEMs, providing customers with the right range of coverage options and services can not only reduce risk and protect customers’ financial investments but also foster trust.
Mike Medeiros is the Vice President of Commercial Equipment at Assurant, where he leads the Heavy Equipment business unit. With over a decade of experience at Assurant, Medeiros has held multiple leadership roles focused on driving business transformation, optimizing operations and enabling growth. He is a forward-thinking, customer-focused and inquisitive leader recognized for delivering innovative, customer-centric solutions.
