Extended Warranties and Service Contracts

Some sellers offer an extended warranty or service contract when you buy a product. An extended warranty or service contract is different from the warrantiesthat may automatically come with a product. It costs extra and might cover different issues than a manufacturer’s warranty. Here’s how to know whether an extended warranty or service contract will give you extra benefits for the extra cost.

Learn About the Extended Warranty or Service Contract Coverage

An extended warranty or service contract might not be worth the cost if a product isn’t likely to need repairs. Check product review websites to see if other people say the product often needs expensive repairs. Read the details of the extended warranty or service contract. It’s not a good value if it doesn’t offer more coverage than the warranty that came with the product.

Before you buy an extended warranty, get information about

• Costs. Look at the initial cost of the extended warranty or service contract, and costs that might be hidden, like deductibles or fees you must pay each time the product is serviced. Do you have to pay to ship the product to a repair center? Is there a fee to transfer the extended warranty or service contract to someone else? Does the extended warranty or service contract set limits on reimbursement amounts? For example, auto service contracts may not fully cover expenses for towing or renting a car.
• Reputation. The value of an extended warranty or service contract is only as good as the company that’s responsible for coverage. Find out who is offering the extended warranty. It’s not necessarily the manufacturer and might be a company you don’t know. Find out how long the company has been in business. Then search online for the company name plus words like “review” or “complaint” to see if there are negative reviews of the company. Check with your state consumer protection office to see if they have any complaints against the company.
• Length of coverage. Use the length and cost of the contract to calculate its yearly or monthly cost.
• Coverage. An extended warranty or service contract won’t cover all situations or repairs. Find out what limitations apply. Does it cover accidental damage? Can the company deny coverage if, for example, you don’t follow their instructions for routine maintenance? Does it cover only specific parts of the product or specific repairs? If it isn’t listed in the contract, assume that it’s not covered.
• Claims process. Going through a difficult claims process or waiting for reimbursement can reduce the value of having coverage. Find out how to make a claim, who takes care of repairs, and if you’ll need to return the item to the store where you bought it.

A Different Way To Pay for Repairs

Extended warranties and service contracts aren’t the only way to plan for future repairs or accidents. After you evaluate the extended warranty or service contract coverage, you might find that putting money aside in a savings account is a better option. Then, if you need to pay for repairs, you can use the money in the account.

Unwanted Calls and Mail About Extended Warranties and Service Contracts

After you buy a product, you might get calls and mail from marketers who want to sell you an extended warranty or service contract. These offers can come years after your purchase, and the marketers are usually not related to the company you did business with. The telemarketing calls — both live calls and robocalls — are probably illegal if you have no connection with the company that’s calling.

Marketers use high-pressure sales tactics, saying things like (“act now, your warranty is about to expire”). They might try to get your personal and financial information, and maybe even a first payment, before they tell you about the contract. It might be risky to buy an extended warranty or service contract from a telemarketer, because the company that’s responsible for the contract might not be in business when you need its services.

Report Problems

If you have a problem with an extended warranty or service contract, report it to

• The FTC at ReportFraud.ftc.gov
• Your state attorney general

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