Is an extended warranty worth it? Questions to ask first

What an extended warranty really is

What stores call an extended warranty is usually a service contract. The FTC notes that these contracts cost extra, are sold separately, and may duplicate coverage that your product's warranty already gives you. The company behind the contract is not always the manufacturer. It may be a business you have never heard of, and the contract is only as good as that company.

Start with the warranty you already have

Before you decide, look at the warranty that comes with the product: how long it lasts and what it covers. The FTC puts it plainly: a service contract is not a good value if it does not offer more coverage than the warranty that came with the product. Product reviews can also tell you whether the item often needs costly repairs.

Questions to ask before you buy

• Cost: the price up front, plus any hidden costs such as deductibles, a fee for each repair, shipping to a repair center or a transfer fee. Is there a limit on how much it will pay?
• Length: divide the price by the years of coverage to get a price per year.
• Coverage: does it cover accidental damage? Can a claim be refused because of missed maintenance? The FTC's advice: if it is not listed in the contract, assume it is not covered.
• Claims: how do you file one, who does the repair, and do you have to bring the item back to the store?
• Who backs it: how long the company has been in business, and what reviews and complaints say about it.

A quick way to compare

Example: a laptop comes with a one-year warranty, and the store offers a three-year plan for $180. The first year overlaps with the warranty you already have, so you are really paying $180 for two extra years, or $90 a year. Compare that with what a typical repair would cost and how likely one is.

The FTC also points to another route: put the money aside in a savings account for future repairs. If the product never breaks, the money stays yours.

Be careful with offers that arrive later

Offers can come by phone or mail years after a purchase. They often come from marketers with no link to the store that sold you the product, and some use high-pressure tactics. The FTC warns that the company might not even be in business when you need service. Ask for the contract in writing and read it before you agree to anything.

When it can make sense

A contract can be worth it when it clearly covers more than the standard warranty, such as accidental damage on a device you carry every day, when the price per extra year is low compared with a likely repair, and when the company behind it has a good record. If you cannot answer the questions above, wait. You can usually decide later, and the manufacturer's warranty covers you in the meantime.

How Keeptly helps

• You set the warranty length for each product, for example three or five years if you bought a longer plan.
• You can keep the plan's contract as a document next to the receipt.
• Reminders come 30, 7 and 1 day before the warranty ends, so you can test the product and claim while you are still covered.
• Insights lists the products whose warranty ends this month.

Questions

Another guideHow to make a warranty claim, step by step

Sources

1. Extended Warranties and Service Contracts · U.S. Federal Trade Commission, Consumer Advice
2. Warranties · U.S. Federal Trade Commission, Consumer Advice