Domestic Appliance Extended Warranties

It is not unusual, as a service agent, to be asked if an extended warranty is any good or if you should buy one or not for a particular product and here I want to point out the good and bad from my perspective having dealt with warranties and warranty companies for many years.

First off let me explain that I am neither anti or pro extended warranty, I believe that in some cases and, for some people, they are a benefit but for the most part I don't think that they are the best value for money that you can get, especially the newer schemes on offer.

What Is An Extended Warranty?

An extended warranty or insurance is a policy or agreement that extends beyond the original manufacturer's guarantee period in short.

There is some debate over the use of the words here as within the trade the word "warranty" implies that the agreement is not held by the manufacturer whereas "guarantee" means that the responsibility is held with the manufacturer and not a third party. In reality, by any definition that I have read thus far, both words in effect mean the same thing and this probably leads to a lot of confusion both within the trade and outside it.

Of course, whilst often very similar, a manufacturers guarantee and an insurance or third party guarantee may differ considerably, especially on what may seem to be minor points.

However an extended warranty is, in effect, a form of insurance against breakdown which is normally sold as an extra in store or after purchase increasingly by phone canvassing (very annoying) or mailshots at strategic times in the product's life.

What Will I be Covered For?

Usually, unless stated otherwise, you will be covered against mechanical and electrical breakdown repair costs or, if appropriate, a replacement product or a partial repayment based on the product value.

But and, it's a very big "BUT"

Policies and service plans do differ and I'd urge you to think very carefully about which insurer you choose, ask the right questions as I've found some over the years that do not cover certain failures. Things like "external plastics or cosmetics" aren't covered. Well that alone can exclude doors, handles, filters, spray arms, drum paddles, kickplates and a whole host of other things that, whilst it may not stop the machine from actually working, can be a real pain.

The kicker is that if it's not covered you may well be expected to pay for the part and the labour to fix it!

In my experience some companies are reasonable and flexible on this, one that I have found a nightmare in the past is London & General Holdings (LGH) as many of their policies do not cover such things. I even had them refusing to cover a dishwasher facia replacement which meant that the door could not close, I considered that functional but they did not as it was plastic and was a facia. It is vital to remember here that in almost every instance the repairer is working on behalf of the insurer, they are not the insurer themselves and are only following the rules and guidelines set by any one company, if they do repair against those rules they will not be paid. Where a call or claim is subsequently rejected by the insurer the repairer will normally pursue the customer for the payment which is totally legitimate and the customer is ultimately responsible for payment as a warranty is only an alternative form of payment for the repairer's services.

Depending on the policy that you have you may also be covered for "accidental damage". This is a broad term for anything else in my experience and these policies seem to cover far more without meaning you have to claim your home insurance policy thereby not affecting your premium. More often than not they also do not require that you pay any excess.

Both Currys and Comet operate such schemes, but they are expensive by comparison.

It is worth noting that, just like any other insurance policy, the level of cover is reflected in the premium and the more you strip out, the cheaper it gets. This is fine until (if you need to) you make a claim and find that what you thought you bought and what you actually bought are worlds apart.

Other common exclusions include:

• Deliberate damage or neglect (neglect meaning that if the machine isn't cleaned, cared for or maintained you could be charged)
• Any form of electronic virus (connected appliances anyone?)
• Incorrect or faulty installation (we see a few tumble driers that are affected by this exclusion as fluff builds up and blocks the external vent after a year or so)
• Damage by foreign objects (coins, keys etc. are not covered and this can lead to major repair costs!)
• Recall or modification work by the manufacturer
• Routine service or maintenance (including that which should be carried out by the customer)
• No fault found calls (read the instruction manual before calling please)
• Repairs or upgrades carried out by any unauthorised person, including the owner!

The Numbers Game

You have to remember that insurance companies do this to make money, they do not provide the services out of the goodness of their hearts, they simply play a numbers game based on the likliehood of breakdown, the cost of spares and the general history of any given brand. However, you'll notice that there's little difference in policy prices between brands. That's because it's costed out across all brands, so even if you do buy a more robust machine you pay the same amount to insure it against breakdown, hardly fair and this would be totally unacceptable if it was car insurance where the same applies along with performance and user parameters added. Which highlights yet another flaw, why should a single person washing two or three loads a week pay the same premium as a family of six doing that a day? Dead simple, customer's don't ask.

So here's where I advise according to the customer's situation, if you do a lot of washing, cooking or dishwashing etc. then yes, it probably is worth paying for a policy and you may well need it, especially on lower cost appliances that break down more. But, if you are a light user, I'd advise you to take a chance, just like the insurance company, and hope that the machine doesn't break and, even if it does, it's highly likely that a repair will cost less than the policy would have anyway. On most service contract work these days for washing machines the average cost to repair sites about £70-80 per repair, yet an additional four year cover on a washer costs £140-180, you do the math.

You won't always win, but it's worth the risk and remember you're also gaining interest as well as the use of the money sat in your bank rather then an insurance companies!

The Latest Trend In Domestic Appliance Warranties

The latest one that we've seen being introduced is Currys' "Whatever Happens" policy where you pay a small monthly fee and "everthing" is covered, not having seen the policy itself yet I cannot comment on its content but I can comment onthe cost.

This turns out to be a very expensive way to insure your appliance, a typical washer will cost well over £200 over the the five years of ownership. So what seems to be cheap, with a low monthly repayment, is actually a very expensive way to do things.

Caveat emptor I think when it comes to insuring appliances, think long and hard beforignsaying yes to buying such a policy and don't let yourself be pressured by in-store sales people. Whilst the major retailers say that their staff are not under pressure to sell I can say that from personal experience in both Currys and Comet as well as others in the past year, sales people do a very hard sell on these add-ons.

Now however, even if you are well out of the original warranty period you can still be pressured into buy a warranty through new tactics to sell you one, that we explain in much more depth in this article.

As of 2011 the OFT are (again) investigating with the premise that there are things not right with the extended warranty industry. We can't say we disagree.