I sat down with Lester Holt on TODAY SHOW over the weekend discuss a tricky topic ... WARRANTIES. Hopefully the segment will help guide the way you think about the value of extended warranties and the decisions you make to help ensure you're not over-paying or under-insuring. The actual definitions of warranty and insurance vary. At the risk of making heads spin, we try to boil it down.
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KEEPING IN MIND WARRANTY PRICES VARY BY PRODUCT AND COMPANY, THERE ARE THREE KEY THINGS YOU NEED TO KEEP IN MIND WHEN APPROACHING WARRANTY DECISIONS:
When you buy an extended service contract, you're betting your new gadget will break within the next three years & that the cost of fixing it will be higher than the price of the warranty. The seller of the warranty is betting it won't. The odds vary. You beat the house if you pay $200 and run up against an $800 repair. They win if nothing goes wrong & they've pocketed $200 of almost pure profit.
It's important to know most extended warranties begin the day you purchase the product, so they overlap with the standard one year manufacturer warranty. Essentially, a three-year policy gives you only two years of additional coverage.
And, you need to know what's NOT covered. Think through the most likely scenario & the process. If you'd have to ship an item back for instance, who pays for the shipping; could you really do without it for a few days or weeks; will the item be repaired or replaced? Will the replacement be new or refurbished?
Know Thyself: The most comprehensive warranties include "accidental" damage. If you're the kind of person or if your child is the kind of person, who loses things or who is prone to having "accidents" (think: losing your laptop, dropping your cellphone), you may be a good candidate. Then again, something like water damage may not be one of the "accidents" covered when you review the terms. So, you've got to weigh what incremental coverage cost guards against.
An Umbrella: If you have multiple gadgets, you may be better off getting an overall "umbrella" coverage from some new players who will let you pay a monthly fee to cover multiple computers, cameras, washers & dryers, dishwashers, etc. More than 50,000 different appliances are listed on www.greenumbrella.com. For a flat monthly fee of approximately $10, they'll handle anything you've purchased in 2008 & in the future. Arguably, the more items you register, the more valuable the potential service. There are some caveats: cellphones are not included, as would drive up the monthly fee and you can only make two claims per year (except for repeated issues on same item, which they'll deem a "lemon" on your behalf).
UMBRELLA COVERAGE IS GOOD ORGANIZING PRINCIPLE AND COULD BE THE WAY TO GO. IF YOU'RE MAKING INDIVIDUAL DECISIONS, HERE ARE SOME SPECIFIC SCENARIOS, STARTING WITH WHAT'S OFTEN THE BIGGEST TICKET ITEM:
1) FLAT SCREEN PLASMA TV
Turns out, TV's almost never break. Today's Plasma and LCD flat panel TVs are surprisingly reliable and designed to last for 40,000 viewing hours. That's about 20 years for the average TV viewer. If there is an issue, the average repair cost for a plasma or LCD HDTV is about $400.00 (source: Consumer Reports). An extended warranty at usually 15% of the cost of the item. For a 3 year extended service plan on a $2300 TV, you're talking about $370.00.
Service plans usually cover in-house repair including parts and labor for all big screen televisions 32 inches and up. And if necessary, replacement of a non-functioning television. TVs are also covered in the case of damage due to power surges. But accidental damage to the set (i.e., if you drop it while your hanging it on the wall) is NOT generally covered.
Perhaps kip the extended warranty if you are buying an established brand name TV, but consider spending to have retailer like a Best Buy install it for you, since moving and hanging TV's on the wall is sometimes easier said than done. Then, just don't mess with the screen. You can pick up a gentle screen cleaning kit at any electronics store for about $15.
LAPTOPS NOW OUTSELL TRADITIONAL DESKTOP PCS, BUT THEY'RE MORE FRAGILE ... HOW OFTEN DO THEY BREAK AND WHAT'S YOUR BEST COVERAGE STRATEGY?
2) LAPTOPS
Laptops are among the most repair prone electronics items. Over 40% of three- to four-year-old laptops will need some type of repair service (source: Consumer Reports). Desktops tend to be more a little more reliable, since we don't' make a habit of lugging them around the house, into Starbucks or on and off airplanes. The fast processors in some of today's laptops produce a lot of heat, so make sure you aren't burying them in a pillow where there's no ventilation.
For about $80.00 for each year of extended service you choose, up to 4 years. Includes in-home service calls/repairs, but they'll first attempt to diagnose and fix the problem over the telephone, prior to dispatching a technician. If a warranty with "accidental damage protection" is offered, it's probably worth adding it, so you're covered on damage from dropping it, getting it wet and other mistakes. Parents of teenagers we spoke with, say they've learned this the hard way:)
All major PC manufacturers give you at least a one year warranty, some offer up to two years, which usually includes parts and labor and some level of telephone support service. After that, they offer what is called "Out of Warranty" service, where repair costs start at $160.00 and can run as high as $500-$600. Simply buying a new laptop battery can run well over $100. A simple Tech support call after your standard term expires could cost as much as $40 a call.
With computer repairs, you also need to ask yourself: "Can I be without my computer for a week or two?" Manufacturer warranty repairs require you to ship the computer to them so they can work on it. UPS has a whole division just to help companies with this given the volume. If you live on your computer or have a small business, you might want to opt for the upgraded service plan, just for the ability to have "on-site" repairs at your house or place of business. Upgraded service plans for computers also often come with VIP phone tech support for trouble-shooting problems.
The extended warranty on any laptop in excess of $1000.00 may make sense, especially if you can't afford to be without it for any length of time while it's being repaired (and shipped back & forth). If you're getting the $399.00 bargain laptop, maybe take your chances, since on a percentage basis the cost could exceed 10-20% and because technology changes so quickly you're likely to be better of replacing than repairing at that price point.
SOME PEOPLE ARE ON THEIR 2ND OR 3RD IPOD ... PARENTS ALSO STRUGGLE WITH THIS, IF THEY'RE THE ONE PURCHASING THE IPOD AS A GIFT. WHAT'S THE MOST COMMON ISSUE AND OUR BEST MOVE?
3) iPod
Short battery life. Most people will get about 8 months to 2 years out of their battery – normally 250 – 500 charges. One of the major causes of short battery life is heat – keep your player out of the sun or a hot car.
On an iPod, the battery isn't something most people can replace themselves ... You literally have to disassemble the iPod. Apple offers an iPod battery replacement program for $59.00. http://www.apple.com/support/ipod/service/prices/#us
Another common problem with MP3 players or iPods – cracked LCD screens. A major culprit there – tight jeans ... If you carry your iPod in your jeans, when you sit down it's going to bend and that's when that LCD screen cracks; repair technicians say the pencil thin iPod Nano is especially susceptible to this ... they see it all the time.
Apple offers a one year limited warranty on iPods. They will repair your iPod with new or used parts or swap our your iPod for a new or refurbished iPod. You either mail in the iPod to an Apple service center or bring it into to an Apple retail store.
Extended service plans can be either purchased directly through Apple or through the retailer where you bought the iPod for about $60 for three years (or really two years, since Apple has the first one covered). http://images.apple.com/legal/warranty/docs/ipodisight.pdf
It's probably worth the extra $60 for extended service if you use your iPod often. If you spend $60.00 for 3 years of service and the plan covers a worn out battery – you essentially have gotten your money back if . If you're buying a much less expensive iPod, like the iPod Shuffle, maybe skip it since on a percentage basis the coverage is of less value.
WITH CELLPHONES AND BLACKBERRIES ... YOU'RE PROBABLY MORE LIKELY TO LOSE THEM, THAN BREAK THEM. CAN YOU INSURE AGAINST THAT?
4) CELL PHONES & BLACKBERRIES:
A lot of people don't know this, but cell phone insurance can be purchased through all major cell carriers. Cost for the insurance runs about $5.00 per month. It covers you for a replacement phone if you lose or you damage it (though not necessarily if you leave it in the car with the sunroof open on a rainy day).
But for any claims made, you will likely be on the hook for a deductible/co-pay. For less expensive phones the deductible is $50.00; for more expensive models – like some of the newer Blackberries – the deductible can be as high as $125.00.
One way around cell phone insurance is via an equipment upgrade (most wireless carriers offer these about every 18 months). In that case they'll give you a break on the replacement cost, but you will have to sign a new 2 year contract. This timing may not always match up with your "accident."
Also, if you had to send your cell phone in to the manufacturer for repairs, can you really live without it for even a few days or a week? That can be a deal-breaker for some people and is a good reason to keep at least one old cellphone around, so you can transfer the # while your phone is being repaired. If you have a couple teenagers at home who commonly break or lose their phones ... Again, it may be worth it.
SWITCHING GEARS FROM TECH TO SOME OTHER TIMES WE'RE FACED WITH A GO OR NO-GO DECISION .... DO WE REALLY NEED RENTAL CAR INSURANCE WHEN WE PICK UP THE VEHICLE?
5) RENTAL CAR INSURANCE
Buying additional insurance coverage for a rental car can add up to as much as $40 per day. But consumers often don't know what they need and don't need. Collision damage waivers, liability insurance, personal accident insurance ... it can all sound and be a bit confusing, especially when you don't know what you already have/don't have.
The key it to try to avoid duplicating coverage & redundantly paying for the same service and to close any gaps in coverage that could cost you. Many travelers don't realize they're more than likely duplicating coverage they already have. Not only does a driver's insurance policy protect against theft or damages to a rental vehicle, but often so does a major credit card used to pay the rental fee. As for personal accident insurance which covers medical and ambulance bills for the driver and passengers in the event of an accident ... health insurance or personal injury protection under auto insurance could already pay for these types of bills. The best thing to do is to call your insurance agent and credit card company in advance. Don't be left standing at the rental desk, feeling pressured to buy it all because you don't have a sense of what kind of coverage you need and what you don't if you are traveling for business or personal reasons. Be sure to specifically ask what's NOT covered, so you can spot holes. For instance, if you decide to rent a fancy vehicle and you drive a clunker at home, your policy may not meet certain thresholds.
Plan ahead, then plan on filling holes and skipping upsells.
6) EVENT TICKET INSURANCE When buying tickets to a concert, theatre or sports event, there's often that nagging feeling ... the show is three months away ... what if I can't make it? Event Ticket Insurance may give you peace of mind.
What it costs and what it covers:
Ticket insurance provides coverage for event tickets that go unused due to illness, traffic accident, car break-down or even a flight delay.
Event Ticket Protector insurance, offered through TicketMaster, which costs 6% of the total ticket and shipping fees, covers the ticket cost, taxes and shipping up to $10,000 per ticket.
Since most fans purchase tickets well in advance on the event date, usually on the day they are released, ticket insurance provides peace of mind that should something unexpected happen that prevent the tickets from being used, the ticket holder won't also lose their investment in the cost of tickets.
Example – Say you want to take the kids to see Disney on Ice. At up to $70 per ticket, it can quickly become a several-hundred dollar event. When purchasing a ticket, the thought of missing the event is usually the last thing on anyone's mind ... But if unforeseen circumstances, such as a car trouble, a traffic accident, medical emergency/illness or even jury duty, prevents you from attending, a family that has shelled out hundreds of dollars for seats is protected from financial loss. So, if mom or dad gets sick and the family can't attend, all tickets purchased are covered. Explaining why you have to miss Mickey Mouse may be a bit more complicated.
Filing a claim? Save those receipts!
Be sure to hang on to your original receipts for all ticket expenses, proof of payments, and other documents that substantiate the cost of the event. Also, hang on to your original unused tickets.
You will also need documentation to explains the cause of why you were unable to attend the event. Things like a completed and signed Physician Statement Form, a Police Report, a notarized statement signed by an officer of your employer verifying the requirement to work, etc.
If you passed on the ticket insurance and can't make it to the show ...
Consider giving your ticket to a friend or see if you can sell it on sites like Ticketmaster or StubHub.
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Comments
i just bought the extended replacement cost thing from sears on a dvd player - but this was because the last two i bought crapped out in about a year...
I bought a universal external battery on-line
http://www.usa-batteries.com/external-battery.htm
well used before now!