Why you should never buy a warranty (most of the time)
I don’t know about you but I get fed up with being offered worthless warranties, especially whenever I buy electronic items or household white goods. I’ve always felt that the likelihood of a claim is so remote it’s not worth it. Even if an item were to need a repair, I am likely to have saved so much money from not having bought warranties, that the savings would most likely far outweigh the cost of the very occasional claim.
Over the last couple of decades at least, my theory has been proven correct. That was up until a few weeks ago when I had two incidents which would have merited warranty claims if I had had warranty cover in place.
Firstly I had a problem with my fridge freezer. The ice dispenser broke off. I contacted the manufacturer, Blomberg, and in fact ended up speaking to someone from Domestic & General, the specialist insurer for household goods. I was given the option of paying £110 for a one-off visit and repair or a warranty plans for £15 a month for a minimum of 12 months including both repair and like for like replacement if irreparable. Of course I chose the second option. In this example I had at least saved the warranty cost of £15 per month over the previous 4 years of owning the fridge freezer so I didn’t feel I had lost out.
The second example wasn’t anywhere near as positive an outcome.
My fiancée Cholpon offered to clean the dirty strap of my 5 months old Apple watch. After she had washed it, it was still a bit wet so instead of putting the strap back on my watch and wearing it, I decided to place both the watch and the strap on top of my MacBook and carry them out of the kitchen. Unfortunately the watch slid off of my laptop and landed on a hard tiled floor and the watch face cracked. I immediately thought ‘oh well I am sure I can take it to an outdoor market and get the screen replaced for £50 cash’. Unbeknown to me at the time, was the fact that an Apple watch screen repair costs £280 in the Apple Store and about the same in the outdoor market! Why? Because most of the internal parts of the watch are actually built into the screen meaning that a replacement screen is virtually the same as a new watch.
Cholpon had managed to claim on her bank’s insurance policy a couple of months ago to pay for the repair of her iPhone screen for just a £50 excess. I contacted my bank and was told that a) only mobile phones are insured and not all mobile devices and b) the excess was £100 anyway. Cholpon took my watch to an outdoor market and was told that it would cost £280 to get it repaired.
I then took my watch to the Apple Store and was again told that a repair would cost me £280. I decided to buy a new watch instead for £415. This time I paid £88 for a 2 year warranty which not only covers repair costs but also complete replacements if irreparable. I figured it was worth paying for warranty on this occasion.
So the moral of the tale is that if you are offered a warranty in future, do your homework and weigh up whether or not it is likely to be worth it before making your decision. It’s the common sense thing to do.
So if you would like some common sense advice on your financial planning and especially your life and health insurance needs, do contact us. You know it makes sense.