You almost have it in your little froggy fingers…the piece of electronics you’ve had your eye on. But do you spring for the insurance policy — otherwise known as the extended warranty, service contract or protection plan?
On one hand, electronics are more complicated and expensive to fix than ever. On the other hand, they’re often sophisticated enough to keep working until it’s time to get the next one. And then there’s the fact that extended warranties are retailers’ single largest profit center — half of the sale price typically goes straight to profit.
While no one should pay extra for no reason, here are 11 questions to help you decide if the extended warranty might be worth it in your situation:
1. How much do you rely on the item? For business or your livelihood?
2. How reliable is the item you’re buying? Flat screen TVs, for example, only have a 3-4% failure rate during the first several years.
3. How reliable is the brand you’re buying? Contrary to what you might think, high-end brands can fail earlier and more often than off brands, especially with appliances.
4. Are you buying an open-box or refurbished item?
5. How much does the warranty cost versus the cost of replacing the item?
6. Does the warranty extend the manufacturer’s warranty or augment it?
7. Does it cover accidents and normal wear and tear (bonus points if it does)?
8. Does it cover power surges?
9. Does it include on-site repair?
10. How quickly will the item be repaired or replaced?
And the biggest question of all:
11. How much is peace of mind for this particular item worth to you?
Whatever you do, don’t let the salesperson scare you into buying a warranty by telling you horror stories. And keep in mind that the salesperson may not know the details because most extended warranties are backed by third parties. You’ll want to read the small print yourself and if you have questions, call the warranty provider. You can usually return a warranty to your place of purchase within 24 hours.
One last tip: If you decide to buy a warranty, register it immediately and make a copy of your sales receipt. Register receipts fade over time!