Americans bought 250 million warranties in 2010, according to the Service Contract Industry Council. But are they worth it?
Consumer advocates note that most products don’t break during the warranty period. If they malfunction right away, they’re covered by a store return policy or manufacturer warranty.
Some other things to keep in mind:
• The cost of the warranty is almost as much as the cost of a repair. So, buying a warranty is like paying for most of a repair, whether you need one or not.
• You can self-insure by setting aside the same money in a repair fund. If the item doesn’t break, you get to keep the money.
• As a general rule, you shouldn’t buy insurance for little things, only for financial disasters. If the cost of a repair won’t wreck your finances, you probably don’t need the coverage.
• Some higher-tier credit cards will extend the manufacturer warranty for free if you purchase the item with the card.
• A warranty might call for replacement with a refurbished unit, not a new one.
• The extended warranty usually starts when you buy a product, largely duplicating the manufacturer warranty for some length of time. Gregory Karp, Chicago Tribune
