Is an Extended Warranty Worth Buying?
An extended warranty, also known as a service contract or service plan, offers additional protection for high-ticket purchases like appliances and electronics. At times, it may seem as if service plans are offered with every piece of technology or appliance you buy. Though the cost of an additional warranty may appear relatively small compared to the cost of repairing a car or a washing machine, you may be paying for a benefit you'll never use. Here are some guidelines to consider when you're offered a service plan in a retail setting.
Understand the Service Agreement
Nothing is more frustrating than purchasing a service plan and not being able to take advantage of the benefit when an appliance or electronic breaks down. Before purchasing any extended warranty, be sure to review the fine print and understand the terms of service. Find out how much it costs to repair or replace the item and compare it to the cost of the warranty coverage. Keep in mind that extended warranties only cover repairs for a set period of time, usually after the manufacturer's warranty expires. One a service plan's initial period is up, you'll need to pay again to extend the coverage.
Compare Warranties and Other Coverages
You may not need to purchase an additional warranty if you're already covered by an existing benefit. For example, if an item is found to be defective soon after purchase, chances are that the manufacturer's warranty will cover the cost of repair or replacement. Other types of coverage may also duplicate some or all of the benefits of a service plan, without the need to pay extra at the point-of-purchase.
- Manufacturer's Warranty: An extended warranty may not offer much more than the basic (and free) manufacturer's warranty.
- Homeowners Insurance: Homeowners insurance will cover damage from certain named perils, such as the loss of an item in a fire or theft.
- Credit Card Benefits: Many credit cards offer additional warranty benefits for items purchased using the card. Check the terms and agreements of your credit card to see if your card offers additional warranty benefits.
Know When You May Need Additional Warranty Coverage
Though the vast majority of your purchases won't require an extended warranty, you may wish to consider a service plan for some items. If you're heavily reliant on your smart device or cell phone, diagnosing and fixing a technical malfunction may cause a huge disruption in your daily life. Knowing you have a service provider who can repair the problem quickly may be worth the price of the service contract.
According to the Service Contract Industry Council, consumers may utilize the service technicians available to them through a paid service plan for technical questions and expedited repair assistance. Priority customer service is often a selling point of service contracts. A service plan may grant you access to repair technicians through a dedicated toll-free number.
Fear of the unknown is often the driver of an extended warranty purchase, especially for large ticket items. To make the best decision, be sure to read over the service plan features and understand what coverage is already available to you through existing warranties and benefits. Rather than pay for a service you'll probably never use, review your household budget each year and consider setting aside some money to cover a range of unexpected repair expenses.