The first paid job I ever had was with a company called CompuSmart. It was a big box retailer from western Canada who was opening their first store in Ontario. I was hired to do sales in software and upgrades, and I couldn’t have been more excited.
During my training, it seemed pretty obvious that the company’s primary focus was to sell extended warranty. Sure, customer service was important, but the training was more about learning how to sell their “SmartPlan” (their extended warranty). Why was this? Because it made them money; lots of money. After understanding why extended warranty matters so much to companies, I realized it was a huge waste for consumers.
How extended warranty works
Extended warranty is pretty straightforward. For a fixed amount, you get your warranty extended for a certain amount of time. If your purchased item is defective or damaged beyond the manufacturer’s warranty, you would be able to make a claim through the store.
Like all insurance policies, it gives you peace of mind. For a small amount, you know that your purchases will be protected.
The thing is, these warranties are almost always a ripoff. I remember during training, the managers would tell us that less than 10% of people who bought the extended warranty would actually need to make a claim. The company practically saw it as free money.
I thought for sure there would be more claims, but I worked at the company for almost two years, and I could probably count the number of people who made a claim on one hand.
Free extended warranty with your credit card
The other main reason I don’t bother with extended warranty anymore is that my credit card gives me an extended year of warranty for free as long as I charge the purchase to my card. Not only that, but it also gives me purchase protection for up to 90 days.
Purchase protection protects me from any price changes and it also gives me the best insurance policy possible for 90 days. What do I mean by that? For those unfamiliar with purchase protection, it protects your purchase from damage or theft (even if it’s self-inflicted). I could literally destroy my purchase within the first 90 days and then make a claim.
Beyond the 90 days, my credit card’s extended warranty gives me an extra year on my purchases, so there’s no need to buy a store plan.
Obviously, with every insurance policy, you need to know the details of your policy. Not every credit card offers insurance, but if you have a premium card; there’s a good chance you’ll have something included.
Even though the extended warranty won’t cost you very much, the odds are you won’t ever make a claim so don’t bother getting it. If you want some extra protection, just get a premium credit card which will give you an extra year of warranty.