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What to Consider Before Buying Protection Plans

Geoff Williams

For many shoppers, it can be challenging to answer the dreaded question: Do you want an extended warranty or protection plan? On one hand, if you're shelling out a lot of money for a product or service, it's reassuring to know that you'll be protected for a longer period of time with the right warranty or protection plan if something goes wrong. On the other, if you're already paying a hefty fee, you may be wondering if purchasing a protection plan is needed or beneficial. That's why we tapped experts to pinpoint top considerations to factor in when purchasing an extended warranty or protection plan. Read on for top instances where it does -- and doesn't -- make sense for you to purchase an extended warranty.

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When You Should and Shouldn't Purchase Protection Plans

Whether you want to purchase a protection plan generally comes down to whether it makes sound financial sense, and depends on a variety of factors, including the cost of the plan and the price of the purchase, as well as what is and isn't excluded in the fine print.

Reasons Not to Buy a Protection Plan

If purchasing an extended warranty or protection plan offers peace of mind, there's nothing wrong with doing so. But there are a few reasons to not do it, says Bruce Sanders, a consumer psychologist in Vacaville, California. "Many consumer advocates recommend against extended warranties," Sanders says.

Sanders adds that you may not want to pay for a protection plan on principle. "You also might feel that in purchasing an extended warranty, you are telling the retailer it's OK to carry merchandise which breaks down," Sanders says.

There are other reasons to be skeptical of an extended warranty. For one, the manufacturer's warranty may already last up to a year. An extended warranty, after all, is a form of insurance, and in a way, you're taking a bet. You may feel that if the product you're buying is going to last a year, it'll probably continue to last through the length the extended warranty covers. Electronics can also be a tricky matter because of products depreciating in value. You might find that in two years, if something does go wrong with, for instance, your TV, that you'd rather not replace it with the same TV but you may want to simply buy something even better and more high-tech.

But the best reason to not buy a protection plan is if the math doesn't make purchasing a plan worthwhile. "The average cost of the protection plan is almost always much higher than the average cost of making necessary repairs to the product," Sanders says.

Reasons to Buy a Protection Plan

Though Sanders is generally skeptical of extended warranty plans, he says that there are some situations where he can recommend getting one. For instance, if you have a limited budget and would find it hard to replace the item or handle unexpected costs for repairs, then you may have a strong case for paying for protection, he says. Along those lines, if you couldn't imagine going without the item, such as a phone or computer, while it is being repaired, and you can get a replacement with that extended warranty, you may want to pay for one.

Steps to Take Before Paying for an Extended Warranty

Sometimes, at a cash register, you may have to make a split-second decision, but if at all possible, there are a few steps you should take, according to Steve Sexton, a financial consultant and president of Sexton Advisory Group, a financial and insurance services firm with three offices in Southern California. He is also the author of "How to Get More Out of Life and Business With Better Results."

Understand the manufacturer's warranty before making a purchase. "Note how long the warranty lasts and what it covers," Sexton says, pointing out that a manufacturer's warranty may be as short as 90 days or as long as three years.

Read the fine print. "Some protection plans include lots of exclusions that make the plan less useful," Sexton says. In other words, if you start seeing things like "repairs caused by accidental damage" and "spilled liquids" buried in the extended warranty contract, you might begin wondering what you're paying for.

Find out if you have coverage elsewhere. "Many credit cards have protections plans for defective purchases," Sexton says. "Some credit cards will cover an auto insurance deductible, enabling you to have your purchase replaced or repaired without purchasing a protection plan, for free. All you need to do is use the right credit card."

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Top Protection Plans for Cellphones

In recent years, due to their popularity and the rising expense, extended warranty plans for smartphones have become popular. You probably carry your cellphone everywhere, which means there are many opportunities to drop it or step on it.

The two largest phone companies, Apple and Samsung, offer their own protection plans: AppleCare+ and Samsung Premium Care. They also offer a one-year warranty.

If you buy AppleCare+, you'll extend the warranty from one year to two, and tech support from 90 days to two years. Prices vary depending on the phone model, but you can expect to pay $129 to $299 upfront, depending on the model and whether you pay for theft and loss. There are also monthly plans if you don't want to pay upfront.

With Samsung Premier Care, you need to buy within 30 days of purchasing; you'll pay $12 a month for a protection plan and can cancel any time. You'll pay a $99 deductible for a repair -- and you won't be covered if your phone is lost or stolen -- and you'll be covered for up to three years from the date of purchasing your phone.

Still, it can pay to shop around for a better phone protection plan. For instance, Asurion offers extended warranty plans for phones and other devices. Prices and coverage options vary; the best plans, which you can get by contacting your phone carrier, cover loss, theft, damage, liquid damage and defects after the manufacturer's warranty ends. Best Buy's Geek Squad offers protection plans starting at $8.99 a month, as well as SquareTrade (starting at $8.99 a month for a single plan; $19.99 a month for a family plan of up to four phones). Phone carriers such as AT&T, Sprint, T-Mobile and Verizon all offer plans, too, covering loss, theft and damage.

They may be worth checking out for certain perks. For instance, AT&T has a plan that will be offering same-day replacement in the spring of 2020 and offers unlimited video and photo storage, and T-Mobile offers unlimited screen protector replacements.

Top Protection Plans for Laptops

Many consumers also get extended warranties for laptops. Many protection plan companies offer them, including SquareTrade and Geek Squad.

SquareTrade offers a three-year protection plan for consumer electronics purchased on the giant online retailer's website. It covers such calamities as liquid damage, mechanical and electrical failures, screen failure or if it simply won't turn on. Prices range from $119.99 to $549.99, depending on the price of the laptop, whether you select a two- or three-year warranty, and whether you pay a $75 deductible or no deductible.

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GeekSquad's extended warranty offers a variety of coverage options, depending on your laptop type. You might pay a little less than $100 or around $400, depending on the price of your purchase and whether you get one, two or three years of protection. As for what it protects you from, the benefits include accidental drops, spills, hard drive failure during normal use and normal wear and tear.

It's a wise idea to shop around, and keep in mind the store you purchase from may offer an extended warranty. For instance, Walmart also offers extended warranty plans for laptops and other items, like mobile phones, TVs and general merchandise. Prices depend on how much the purchase is; for laptops, you'll be covered for mechanical and electrical failures from normal use as well as accidental damage, such as your toddler spilling grape juice on the keyboard. Intentional damage, loss and theft are not covered.

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