- Extended warranties are often poor value because sellers earn a high margin on them and most failures are already covered by the standard warranty.
- You may already have protection from the manufacturer, consumer law and your credit card.
- A plan can make sense for costly products that are expensive to repair and where accidental damage is a real risk.
- Read what is excluded before you buy, because accidental damage and wear are often not covered.
Extended warranties are often poor value, but not always. Sellers earn a high margin on them, many products already come with a manufacturer warranty and consumer protection rules, and the plan only pays out if something fails in the later years that it covers. For most people buying a typical product, the money is better saved than spent on the plan.
The short answer
There are exceptions. A plan can make sense for expensive products that are costly to repair, for devices that are easily damaged such as phones and tablets in the hands of children, and for items where repair parts are scarce. The right choice depends on the product, the plan's terms and the protections you already have.
This guide explains the types of plan, the maths behind why they are usually poor value, what they exclude, the protections you may already have and how to evaluate a specific offer.
What an extended warranty is
An extended warranty is a paid plan that covers repair or replacement of a product for a period beyond, or alongside, the manufacturer's warranty. The name covers several different products.
| Type | What it is | Typical features |
|---|---|---|
| Manufacturer extended plan | A plan sold by the maker, such as an extended care plan. | Official repairs and parts, sometimes accidental damage cover. |
| Retailer plan | A plan sold at checkout by the store. | Varies. Often run by a third party insurer. |
| Third party plan | A plan from an independent company. | Varies widely. Check the company's record. |
| Credit card extension | A benefit from some cards that extends the warranty. | Often one extra year on eligible purchases. |
| Accidental damage plan | Covers drops, spills and cracked screens. | Usually has an excess or deductible. |
Standard warranties cover defects in manufacture. Accidental damage is usually separate, and many plans bundle it in.
Why they are often poor value
Think of an extended warranty as insurance, and insurance is priced so the seller makes money on average. The seller expects to pay out less in claims than it collects in premiums, and the store usually earns a commission on selling the plan. That does not make every plan a bad purchase, but it does mean that on average you pay more than you get back.
Timing also works against the buyer. The manufacturer's warranty already covers defects in the first year or two, which is when many faults appear. A plan that begins after that only pays out for failures in the later years, and those are less common for many products. You are paying now for a possible repair later.
Finally, many plans are rarely used. People forget they own one, lose the paperwork or find the claim process slow, so the value they actually receive is lower than the plan suggests.
A simple way to judge a plan
Compare the price of the plan with the likely cost of repair and the chance of needing one. You rarely know the exact chance, but you can reason about it. Suppose a laptop costs 1,000 dollars and a three year plan costs 200 dollars. If a repair would cost 300 dollars and the chance of needing one is one in five over the plan's period, the expected cost of repairs is about 60 dollars, much lower than the price of the plan.
The plan only pays off if the likelihood is far higher than that, or if the repair would cost far more. This is also why plans for products that rarely fail, such as many small appliances, are poor value, and why plans for products that are fragile or expensive to repair can be better.
What plans usually exclude
Read the exclusions before you pay. A plan that excludes the thing most likely to go wrong is poor value at any price.
- Accidental damage, unless you buy a plan that includes it.
- Normal wear and tear, including battery wear.
- Cosmetic damage such as scratches.
- Loss or theft.
- Damage from liquid, unless the plan says otherwise.
- Problems caused by unauthorised repairs or modifications.
- Consumables such as filters, bulbs and cartridges.
The protections you may already have
The manufacturer's warranty
Most products come with a warranty for a year or more. It covers defects and is free, so check its length and what it covers before you consider anything extra.
Consumer law
Many countries give shoppers rights beyond the warranty. In the European Union, a legal guarantee generally lasts at least two years for faulty goods, and in the United Kingdom and Australia, consumer law covers goods that are faulty or not of acceptable quality for a reasonable period. In the United States, rights vary by state and by the terms of the warranty. Look up the rules where you live, because they may cover you for longer than a paid plan.
Credit card benefits
Some cards extend the manufacturer's warranty by a year or more on eligible purchases, or provide purchase protection against theft and damage for a short period. These benefits change, so check your card's current terms, and keep your receipt and the card statement.
When an extended warranty can make sense
- Expensive products that are costly to repair, where a single failure would hurt your budget.
- Products where parts or repairs are hard to get, such as some laptops with soldered components.
- Devices that are likely to be dropped or damaged, such as a child's tablet or phone, when the plan covers accidental damage at a fair price.
- Large appliances in the later years of their life, if the plan is cheap relative to repair costs.
- Products you rely on for work, where downtime costs more than the repair.
Four quick examples
A mid range laptop
A laptop costs 800 dollars and the store offers a three year plan for 150. The manufacturer already covers the first year, and consumer law may cover faults for longer. The plan is likely poor value, and the 150 dollars is better kept for a battery replacement or a repair if one is needed.
A child's tablet
A tablet costs 300 dollars and a plan that covers accidental damage costs 60, with a small excess per claim. Children drop tablets often, and a cracked screen repair can cost close to half the price of the tablet. This is a case where the plan can pay for itself, as long as the terms are clear.
A washing machine
A large appliance costs 900 dollars with a two year manufacturer warranty. A plan that extends cover to five years costs 120. Repairs for these machines can be expensive, but reliable models often run for a decade without trouble. Check the repair record of the model, and consider the plan only if the machine has a poor reputation.
A small kitchen appliance
A blender costs 80 dollars and a plan costs 15. A replacement costs about the same as several years of plan fees, and the item is easy to replace. The plan makes no sense here.
How to evaluate a specific plan
- Check the price of the plan against the price of the product, and against a typical repair.
- Read what is covered and what is excluded, including accidental damage and battery wear.
- Find the excess or deductible you pay per claim.
- Check who handles the repair: the maker, the store or a third party, and where it takes place.
- Check how to claim, and how long a repair or replacement takes.
- Look at whether you can cancel and get a refund, and whether the plan transfers if you sell the product.
- Check the reputation of the company providing the plan.
- Compare with the protections you already have.
Alternatives to buying a plan
The most effective alternative is to put the price of the plan into savings, so that you pay for a repair yourself if you need one. Across many products, you come out ahead. Other options include buying a product with a strong record for reliability, choosing a longer manufacturer warranty, paying with a card that extends warranties and buying a refurbished item with its own warranty, as we describe in refurbished vs new.
You can also check how easy a product is to repair before you buy. Repair guides and teardown reviews tell you whether a battery or screen can be replaced cheaply, which is worth more than a plan you will probably never use.
Making a claim
If you do buy a plan, keep the receipt, the plan documents and the claim number, and register the product if the plan requires it. When something fails, contact the provider promptly, describe the fault clearly and keep a record of every conversation. If a claim is rejected, ask for the reason in writing and compare it with the plan's terms.
Check the product before you check the plan
The best protection is a product that is unlikely to fail. VEYDICT's verdicts highlight recurring reliability complaints and the main catch with each product, which tells you whether a plan is likely to matter. Paste a product to see the verdict, or read how to return a product and how to avoid buyer's remorse for related steps. The category pages explain what we check in each kind of product.
Questions
Does my credit card already cover purchases?
Some do. Check your card's current terms for purchase protection and extended warranty benefits, and keep your receipts.
Is an extended warranty ever worth it?
Sometimes, for expensive products that are costly to repair or easily damaged, when the plan is fairly priced and the terms are clear.
What is the difference between a warranty and insurance?
A warranty covers defects in the product. Insurance usually covers damage, loss or theft. Many plans combine the two.
Can I buy an extended warranty later?
Often yes, within a set period after purchase. Check the terms, since the options and prices may change.
Do extended warranties transfer if I sell the product?
Some do and some do not. Check before you buy if resale is likely.
Are phone insurance plans worth it?
They can be for fragile or expensive phones, if the excess and the monthly cost are reasonable. Compare with the cost of a repair and your own risk.
