1. Retailers love them.
In fact, retailers may reap more profit from warranty contracts on
appliances and major electronics than they do on the products
themselves (that's why sales-people are coached to urge you to buy
the extra coverage). Typically, you'll pay 10% to 20% more for an
item to extend a one-year manufacturer's warranty through the fifth
year of ownership, according to the Service Contract Industry
Council. Most retailers hand off the contract to a third-party
administrator in exchange for up to half of what you paid.
2. Odds are you won't need it.
Celia Kuperszmid Lehrman, of
says that most major appliances do not break down within the
extended-warranty period (among the exceptions are refrigerators
with icemakers, electric wall ovens and dishwashers). When they do,
she adds, the cost of repair roughly equals the cost of the
3. You may already be covered.
American Express cards extend the length of the manufacturer's
warranty by up to one year, and Visa Signature and most MasterCard
credit cards will double it. Costco extends manufacturers'
warranties on TVs, projectors and computers to two years from the
date of purchase. Plus, the manufacturer may provide a free or
discounted fix for a defect that doesn't reach the level of a
4. Service? What service?
Timothy Meenan, executive director of the SCIC, says that with an
extended warranty, you step to the front of the line. But Steve
Sheinkopf, of Yale Appliance and Lighting, in Boston, says he sells
and services his own extended warranties because most third-party
administrators do not respond quickly to customer complaints.
William Purdy, a factory-authorized appliance repairman in
Telluride, Colo., says he's found that administrators pay low and
slow, and demand burdensome paperwork.
5. It's easy to check the provider's track record.
If you're considering an extended warranty, ask upfront who will
provide service and vet the provider online, using a source such as
Angie's List. Read the contract and look for deductibles, limits to
the number of covered service calls, exclusions to coverage and
triggers for cancellation. (If the appliance can't be fixed after a
reasonable number of attempts, will it be replaced?) Then check the
record of the administrator with your state's department of
insurance and the
Better Business Bureau
. For instance, Assurant, which administers extended warranties for
manufacturers such as Whirlpool and KitchenAid, gets an A, the top
rating. Warrantech, which sells the RepairMaster warranty through
retail appliance dealers and online dealer AJ Madison, gets an F,
largely due to lengthy delays in providing service.
6. You can cancel.
If you bought an extended warranty, most states mandate a 30-day
"free look" period (some contracts provide up to 90 days), during
which you can cancel and receive a full refund. (To learn more,
contact your state's consumer-protection department.) You may still
cancel after that, but you'll receive a prorated refund, and the
administrator may charge you a fee.