You almost never need to buy this type of coverage
Consumer Reports magazine: December 2012
While you’re doing your holiday shopping, be prepared for the inevitable pitch to add a service plan, or extended warranty, to your purchase, especially if you’re buying electronics or appliances. Salespeople will tell you that a service plan gives you the peace of mind of knowing that any repairs needed after the manufacturer’s warranty expires will be covered. What they won’t tell you is that stores keep 50 percent or more of what they charge for plans—more than they can make selling actual products. They also won’t tell you these reasons you almost never need one:
Products last a long time. Our reader surveys show that many consumer products are reliable, making a service contract unnecessary. If products don’t break while the manufacturer’s warranty is in effect, they probably won’t during the service-plan period, particularly if you buy brands that we’ve judged to be especially reliable.
Contracts can be expensive. A service plan can increase an item’s price by a third or more, and on average it costs not much less than what you’d pay for a typical repair. You can self-insure by putting the cost of contracts into a dedicated bank account for repairs and replacements. That way, even if you have to pay to repair or replace an item, you’ll still probably be ahead overall. Also, our surveys show that repairs you pay for out-of-pocket might be handled more quickly and have a somewhat better chance of being done properly than repairs covered by service plans.
Coverage may come up short. Because of commissions or corporate pressure to sell warranties, salespeople might exaggerate the extent of the coverage or fail to point out the fine-print limitations. We found plenty of contract-related consumer complaints on online message boards. Some of those who tried making a claim reported having to wait on hold for long periods only to be told that there was no repair shop near them or no record of their contract. Some people reported waiting weeks for repairs or having claims denied because the damage was deemed to be their fault. And some said their plan began on the purchase date, covering much of the same period as the manufacturer’s warranty.
Companies want satisfied customers. Even if the written, or “express,” warranty or return period has expired, the manufacturer or retailer might help if you have a problem with a product. Companies often have customer goodwill programs that offer a repair, replacement, upgrade, or refund if your request is reasonable. If your first attempt to get help from the company doesn’t work, try going higher up or posting your complaint on the company’s website or social-media page.
Your credit card may cover it. Many credit cards automatically extend a manufacturer’s warranty by up to a year when you use the card to pay for the entire purchase. Coverage varies by card, and there are limitations. For example, an item must come with a manufacturer’s warranty to start with. So check your card’s terms and conditions.
To use these programs, you typically must have copies of the written warranty and your receipt. If available, register the purchase with the credit-card warranty program. Visa’s optional Warranty Manager Service, for example, lets you register and manage your warranties online.
You have other warranty rights. For most purchases, state law gives consumers the right to receive a product that does what it’s supposed to do, is free of substantial defects, and lasts a reasonable amount of time. This so-called implied warranty of merchantability can expand your rights beyond any written warranty. Retailers in all but a handful of states are allowed to “disclaim” this protection by using terms like “as is” or “with all faults,” though it’s uncommon in walk-in stores. But those disclaimers are often in online retailers’ fine print and in manufacturers’ written warranties.
It may be an easy fix. Searching the Web using your model and a brief description of the problem may turn up advice on a quick, low-cost fix that you may be able to do yourself. In some cases, something you think is broken may only require a tweak or advice on its proper use.
If you buy a laptop that will be carried around, a type of service plan that covers accidental damage might be worth considering. Dell offers stand-alone accidental damage coverage from $59 to $79 for two years, depending on the model. Sony offers a contract that doubles its basic one-year warranty for $100 to $200; two-year accidental damage protection can be added for $50 to $100.
Another option is to add coverage to your homeowners, renter’s, or condo insurance policy. A scheduled personal-property endorsement (also known as a floater) can cover a single computer; a home-computer endorsement can cover all of your computers and peripherals. Liberty Mutual’s home-computer endorsement is just $20 a year with a $50 deductible.
Before choosing any of those options, read the fine print so that you’ll know exactly what is and isn’t covered.