Are those Extended Warranties really Worth the Extra Cost?

So let’s say you’re getting ready to buy a new computer, tablet or smart phone. Then, when you get to the register to pay, the cashier asked you if you’d like to purchase an extended warranty. They might call it something different like a “protection plan”, “insurance” or a “service agreement”.

The thing is though that you’re already making a large purchase and, as you sit there listening to their spiel, you wonder to yourself if you should pay even more for coverage that you probably won’t ever need.

James Talaga, Ph.D., says that it all depends. He’s a professor of marketing at La Salle University and he says that, when it comes to extended warranties, you need to look at several factors, including your risk tolerance and whether or not the new device that your purchasing is likely to fail.

Ty Shay, chief marketing officer at warranty company SquareTrade, explains that a traditional extended warranty takes the normal manufacturer warranty and extends it by 1 to 2 years. With this type of extended warranty you’ll be protected against the device failing for what are considered ‘manufacturer reasons’ but “wear and tear” or accidental damage might not be covered.

“We have claims data from tens of thousands of devices, and most of the claims are from accidental damage,”  Shay  went on to say. That’s why, in his opinion, accidental damage coverage might be something you want to include on your new device purchase. (Of course, his company covers accidental damage under its extended warranties so his opinion might be slightly biased.)

Most companies require that you purchase your extended warranty at the exact same time that you purchase the product, although some companies and stores will give you up to 30 days  to add it on. Shay said that “our latest estimate is that 1 in 3 smartphones will break in a two-year period”. What that means for most consumers is that their new cell phone probably won’t last until the end of the contract they just signed.

Smartphones are typically subsidized through the carrier’s two-year service contract. If the phone breaks before two years, consumers are “stuck paying for a repair or replacing it themselves,” at upward of $649 for a new phone, says Shay.

It’s a good idea to fully understand your coverage before you purchase an extended warranty. One great example is AppleCare+, which only covers for two incidents of accidental damage during the period that you’re covered. There’s also a $79 service fee with each claim. A SquareTrade survey in 2012 found that almost 20% of iPhone owners had damaged their iPhone one or more times during the previous year.

Another factor is the cost to repair or replace your smart phone under the extended warranty, which usually is $99 to $199, depending on the model as well as the plan that you have.

Dave Greenbaum, owner of DoctorDave, a computer repair company in Lawrence, Kansas, recommends that his customers purchase extended warranties for laptop computers and tablets, but not for desktops. The reason is that laptops and tablets are more expensive to repair due to the fact that they have smaller, more proprietary parts. He also says that, since they’re carried around a lot more than a desktop computer, there’s a lot bigger chance that they’ll get damaged from jostling, drops or getting banged around. He said that, on average, desktop computers not only fail less frequently but also are a lot less expensive to repair.

Greenbaum does recommend AppleCare for all Apple products however, including desktops, laptops, tablets and the ubiquitous iPhone. The reason is simple; “Apple products are extraordinarily expensive to repair,” he says. One of the values and their extended warranty product is that, when a product is in need of repair, it can be fixed at all of the retail locations that Apple has. Also, their extended warranty includes three years of tech-support.

Three years is plenty for any computer warranty, says Greenbaum, because the average laptop lasts around three years; the desktop averages five. “The other issue is that technology makes it obsolete after that time.”

Lastly, Greenbaum says that if you’re worried about accidental damage, you read the warranty first and purchase an upgraded policy that includes coverage for accidental damage. He says that many companies sell this type of policy for an additional $100 and that, under most extended warranties, accidental damage isn’t covered.

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