Extended warranty and protection plans are cover that a shop offers just before you pay, for the product you are buying. Examples are an extended warranty on a phone, shipping protection on a parcel, and cover for the things kept in a rented storage unit. They are one kind of embedded insurance.
A warranty is a promise to repair or replace a product if it fails. A new phone usually comes with a one-year warranty from the brand. An extended warranty adds more time, such as a second year. A protection plan can also cover accidents that the brand's warranty does not cover, such as a cracked screen or water damage.
Here is how it works at an online checkout. Say you add a ₹20,000 phone to your cart. The shop's website sends the phone's model and price to the warranty company's system. The system replies with a plan and a price, for example one year of screen protection for ₹1,499. You tick the box and pay ₹21,499. The plan is created in your name, with the phone's IMEI number. If the screen cracks, you file a claim, and the warranty company pays for the repair. That last step is handled by claims management software.
Shipping protection works the same way. For instance, you pay a small amount at the checkout of an online shop. If the parcel is lost or damaged, you get a refund or a new product.
The same idea appears outside shopping. Consider a company that rents out storage units. It sells a protection plan with each unit, through its self-storage software. In the United States, a home warranty pays for repairs to a home's appliances and systems, such as the air conditioner or the water heater.
Each plan is a small insurance policy. Behind it, a policy administration system records who is covered, for what, and until when.