You likely panicked the last time a sales clerk sprung that last-minute question on you when you made a major purchase: do you want to spend an extra $30, $50, or $200 on an extended warranty for that refrigerator, digital camera, or other pricey item? You didn’t have time to think about it, so you went ahead and handed over a chunk of change you hadn’t planned on spending. But is an extended warranty anything more than a way to make you pay for something you’ll never use?
Fine Print Is Sneaky
Always be aware of what’s covered in a warranty. Neither Apple‘s one-year limited warranty or optional AppleCare Protection Plan covers liquid damage or other accidental damage (such as dropping your phone on the sidewalk) for iPhones or iPods (indicators on the product change color upon contact with liquid, so yes, Apple will know). When you read the fine print on any warranty, you may find that the most likely problems — and perhaps the most expensive ones — aren’t covered. It’s extremely important to check if a warranty includes theft or accidental damage (most warranties don’t) as well as tech support.
When the Extended Warranty Might Be Worth It
If you’re the type to upgrade your phone every year, you obviously don’t need to spend money to extend your warranty beyond the manufacturer’s warranty; however, for a computer or television that you might hold onto for several years — and that could warrant much more costly repairs — an extended warranty might be worth the extra cash if you have it on hand. Products that you use heavily or while traveling — laptops, for instance — might warrant an extended service contract, but you may find it cheaper to purchase the warranty directly from the manufacturer rather than the retailer.
The length of the manufacturer’s warranty may also determine whether you spend the money to extend it. Some retailers may actually sell you an extended warranty that overlaps with the original manufacturer’s warranty, so that the “additional” three years of the extended warranty only gives you three total years instead of three starting after the original one-year manufacturer’s warranty. Check the dates in the contract before you buy.
Not Everything Breaks
If you purchase an extended warranty on every product you buy, you’re definitely wasting money. Consumer Reports says that few appliances will actually need repairs within the 1- to 3-year warranty period, and that if you do need repairs they are likely to equal the cost of a warranty. Read reviews on products before buying them; if a product has been around for a couple of years and has good reviews, you know the likelihood of needing repairs is low. The median price on service contracts for appliances is around $114 for a major appliance and $39 for a small appliance; you’re probably better off not paying for “possible” repairs — if it breaks, you’ll fix it. If it doesn’t, great — no money is wasted.
Some Offers Are a Scam
Car owners sometimes receive warnings in the mail stating that the warranty is about to expire and needs to be extended immediately. If the message seems pushy and urgent (“This is the second attempt to alert you!”) the number you call is likely to end up being a high-pressure sales pitch to purchase an overpriced, worthless warranty. Radio and television ads also advertise warranties, but your safest bet is going directly through your manufacturer, who may reject a warranty from other companies.
You Have Other Options
A smarter option than paying for insurance on expensive products is to have a small stash of cash saved for possible repairs — that way you’ve got the money saved and only end up spending what you have to.
Another option for protecting your products is using a credit card. Many credit card companies automatically provide an extended warranty on any item purchased using the card; all American Express cards and higher-end cards from Visa and MasterCard offer free extended warranties on products purchased, so call your credit card company to find out what’s covered.
