Which of the following is NOT a method of backing extended warranties?

Backing extended warranties requires a reliable and formal method to ensure that claims can be honored and obligations met. A verbal agreement lacks the necessary legal and financial assurance required to support warranty obligations. It does not provide any concrete documentation or guarantee, making it insufficient for backing warranties.

In contrast, an insurance company provides a formal and regulated method of backing extended warranties through insurance policies that cover claims. An irrevocable letter of credit issued by a bank guarantees that a certain amount of money is available to fulfill warranty claims, ensuring that funds are secured. A bank guarantee is another strong backing option, where the bank promises to cover losses if the warranty provider fails to fulfill its obligations, providing an additional layer of security. These options are formalized, legally binding, and financially backed, making them suitable for supporting extended warranties.