Extended Warranty: Do you Need it? What if a Repair Claim is Denied?
February 7th, 2012. By AbiK
It’s become the all-familiar conversation as you pay for that washing machine, HDTV, smart phone or even a set of luggage— “Would you like to purchase the extended warranty on this? It covers blah blah blah blah just in case blah blah blah…” Chances are, as if by rote, you shake your head to indicate that, no, you don’t want whatever protection plan they’re offering up.
It makes sense, after all, as we’ve been trained for years now by consumer advocacy groups to “just say no” to most extended warranties. It’s become a Pavlovian response. But then why are these protection plans still around if no one is buying them? Clearly some folks must be buying—and the question is, are they the smart ones or are we really doing the smarter thing by passing up what might seem like some extended warranty scam?
The answer is, it depends.
So here are some extended warranty guidelines—things to consider before opting to pay for a protection plan that goes beyond the manufacturer’s initial coverage plan period (and what to do if after you’ve purchased a protection plan you run into a bad faith insurance situation.)
1. Do your homework—research what you’re buying before you buy it.
Reliability Ratings. Find out how reliable the appliance or tech gadget is—does it have a bad track record for repairs? How costly are repairs? Look at how the product is rated at Consumer Reports, for example. Check out reliability reviews on laptops, smart phones, tablets, HDTVs, cameras—all tech gadgets and gizmos–at PC World, CNet or PCMag. Reliability ratings will give you a sense of what kind of repairs, if any, you can typically expect the product needing over the time in which you’ll own it
New May Not Mean Reliable. Keep in mind as well that new generation products–that is, products with new technology or design features–may not have all their bugs and kinks worked out when they launch. In such an instance—if you’re the type who has to have the latest and greatest thing on the market regardless of how much reliability data may be available on it—then an extended warranty may be worth looking into. Or, hold your horses and wait for the next production run in which improvements have been made. And a final note on new tech—if you think you’ll upgrade or switch to a new model within a couple of years anyway, the extended warranty probably isn’t worth it.
2. Look in your wallet—your credit card may protect your purchase, too.
Paying with Plastic can Provide Extended Coverage. Cards such as American Express offer some extended warranty protection with even the basic Green Card. This is how the AMEX extended warranty coverage works:
When you charge the entire cost of a covered product with your American Express® Card, the Extended Warranty will extend the terms of the original manufacturer’s warranty for a period of time equal to the duration of the original manufacturer’s warranty, up to one additional year on warranties of five years or less that are eligible in the U.S.
If you’re not sure how or what might be covered with your credit card, call the customer service number on the back of your AMEX, VISA, MasterCard, Discover, etc. card and ask. You may find that you’ve got extended warranty protection already.
3. Find out what the extended warranty covers.
Read the Extended Warranty to Understand the Terms. Know what you’re paying for and what to expect should your 3-year-old drop your smart phone into the toilet. Some warranties don’t cover all “accidents”. Some only cover a specific set of parts. After reading about the product’s reliability and which parts are most likely to fail, compare that information with what’s covered by the extended warranty.
Understand the coverage period as well—typically, you’ll pay more for a longer coverage period, which at first makes sense. But if you’re not planning on keeping or using the product for a full five years, you probably don’t need a 5-year extended warranty, and you’re better off saving your cash.
4. Follow the 20% rule.
5. If something goes wrong…
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Buying extended warranties for the first time can be tricky, even confusing. You must understand what it is you want covered and then look for a warranty that provides this type of cover. Buying an extended warranty does not excuse you from buying auto insurance. You still to have your car covered under the best auto insurance policy you can afford, since these are two different products.
Always, always research the company before you buy a home warranty. Angies list has rated home warranty companies as least rated for the 4th consecutive year! That doesn't mean all companies are bad. There are many reputable companies in business. Check company reviews before you purchase.
One thing home owners should be careful of is the notion that the purchase of a home warranty is just a one-or-the-other scenario. It makes a lot of sense to come up with a back up plan if your systems and appliances are not under some sort of warranty or extended service agreement. Even if the only back up is a savings account, it's still a lot better than having a water heater, HVAC, or other expensive item break down without any planned way to offset the cost. For anybody researching home warranty for the first time, the best advice I've ever read or heard was to talk with real estate agents or other home owners in the local area who have first hand experience dealing with warranty claims. That's the best way to know what you're getting into if you choose to purchase one for your own home.
Definitely be sure to look at what is covered and not covered. You don't want to end up with an extended auto warranty, or something similar, only to find that the part that breaks most often isn't included in your coverage!
I have been with Total Protect home warranty for 15+ years. My appliances worked well as did my garage door opener. Now, the appliances have began to have trouble, I have called on refrigerator, wash machine, garage door opener and each service call the same “will not cover” worn out, should have called someone in to perform maintenance. And each call to home protect generated a 125.00 dollar billing. Home protect sub contracts and the garage door opener was examined by a tech working for Sears. He was willing to fix the door if I paid him privately, 700.00 dollars. Home protect supervisor told me they were happy to hear that. If I am denied a claim it must be good to have someone ready to fix it. I paid a monthly fee for 15 years, as long as everything worked, no problem, but when the appliance is 15 years old, there is nothing on the market similar any longer. Total protect is owned by cross country do not purchase a plan from them.
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