Posts Tagged ‘ Home Warranty ’

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.

Don’t Pay more than 20% of the Product Price for an Extended Warranty. Some reports indicate markups of close to 50% for extended warranty protection plans. The generally accepted rule of thumb is not to pay more than 10-20% of the price of the product for an extended warranty to cover it.

5. If something goes wrong…

Get help when Covered Repairs or Replacements aren’t made. As with any agreement, sometimes things don’t go as planned. If you’ve had a legitimate problem with a product that you’ve purchased an extended warranty for, and you’re having difficulty getting the warranty company to cover the repair or replacement—or they’ve outright denied your claim when it should have been covered—you may have a bad faith insurance claim. Most people think of bad faith insurance in regard to life or health insurance claims, home insurance claims, or as it relates to car accident claims. Your extended warranty agreement is a form of insurance that can go “bad” as well. If you feel you have an extended warranty bad faith insurance claim, you may want to seek legal help.

Tags: Bad Faith Insurance, Extended Warranty, Home Warranty, home-warranty-insurance-lawsuit, Protection Plan, Reliability Rating
Posted in Consumer Fraud, Emerging Issues, Insurance | 6 Comments »