Just Say No (Maybe)!

Just Say No (Maybe)!

Audio Version: Let Me Hear It!

That awkward moment when the cashier asks if you want to buy a “service plan” for your $18 toaster.  Is it really necessary?  Probably not.  So, why the offer?  Because retailers can make far more on an extended warranty than on the product itself – sometimes as much as 50% of the warranty price!

Before you succumb to retailer pressure, consider these reasons not to buy an extended warranty:

Repairs may cost less than the service plan.   The fact that an insurer can afford to give retailers such a large chunk of the premiums should tell us something about the cost of repairs and how many people actually repair the products insured.  Repairs on small electronics and larger appliances are often no more than what you’d pay for the insurance (that you may or may not use).

Your credit card may protect you.  Many credit card programs provide a year or more of coverage with far less exclusions than found in service plan warranties.  Call your credit card company to learn more about the purchase protection they offer on products bought with their card.

You may not use it.  Extended warranties often duplicate coverage already offered by the manufacturer.  Major defects tend to appear during the first few months of using a product when coverage is available by the manufacturer.  Other defects or breaks that take longer to surface often occur after the warranty has expired.  Also, most of us won’t wait for the replacement option anyway.  We’re a “shiny and new” economy and consumer product prices go down over time.   Is it really worth paying $100 to insure a DVR three years from now if you can pick up a newer version for close to that cost by then?

So, what’s worth it and what’s not?

Worth It

Used Products (i.e. cars)

Home Warranty


Mac Computers


Not Worth It



Big-screen TVs

Desktop PCs

Don’t get us wrong, we believe in insurance, but who can afford to insure everything?  We’d much rather see you put your “what if” dollars towards building your emergency fund and protecting your family with life insurance before ever spending a penny on insuring a toaster.