Are Extended Warranties Worth It?

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Tips: 10 Extended Warranty Pointers

Extended warranty tips
Illustration: Jonathan Carlson
Whether an extended warranty is a wise purchase depends on estimates--or guesses--on your part. These tips can help you make up your mind.

  1. Read the terms before you buy: Nearly half of the people in our survey didn't read the terms of the extended warranty beforehand. You don't have to read the warranty in the checkout line--take it home. You can usually buy it later.
  2. Determine the coverage term: Look for the word inclusive, which means the store's warranty overlaps with the manufacturer's--so a four-year extended warranty really gives you only three additional years on top of a standard one-year warranty.
  3. Beware shipping charges: If the product needs to be sent in for service, you could get stuck with the tab.
  4. Consider accidental damage coverage: Most policies do not cover products that are damaged from falls, spilled coffee, or getting run over by the family truck. You'll pay more to protect against the oops factor, but it may be worthwhile for mobile products.
  5. Know the cancellation terms: If you feel buyer's remorse, you can usually get a full refund if you act quickly, or a prorated refund down the road, provided you haven't used the warranty.
  6. Look for extras: Many extended warranties cover replaceable items, such as projection TV bulbs, which can cost $300 or more. But note how much TV you watch, and compare it against the expected lifespan of the bulb.
  7. Investigate the product's reliability: CRT televisions, for example, hold up much better than sets with newer technologies. You can also predict device reliability by examining a manufacturer's record on this score. Find that data in PC World's annual Reliability and Service survey and Consumer Reports' reliability ratings.
  8. Weigh plan cost vs. product cost: For example, Best Buy charges $60 for a four-year plan on a $200 CRT television (30 percent of cost) and $400 for a four-year plan on a $4000 projection TV (10 percent). CRTs break down less often, so paying the higher percentage doesn't make sense.
  9. Shop around: A four-year plan for a Sony rear-projection TV set costs $400 at Best Buy, $525 at Circuit City, and $600 at CompUSA.
  10. Check your credit card terms: Some cards extend the manufacturer's warranty. But if you need something fixed, you may have to pay up front and be reimbursed.
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