ELECTRICAL retailers sell some £800 million of extended warranty policies each year. Not all are actually needed, yet to extend a one-year manufacturer's TV warranty to five years could cost £260.
Comet earns up to 80 per cent of its profits from extended warranty commission, and Dixons - which owns Currys, The Link and PC World - 47 per cent.
Before buying such a policy, the Office of Fair Trading suggests asking:
"What free guarantees apply? Expect at least one year's guarantee from the manufacturer
"What other safeguards are there? If the product is unsatisfactory, the retailer is liable under the Sale of Goods Act 1979. Accidental damage, fire or theft might be covered under your home contents insurance
"Should the extended warranty be bought with the appliance? Policies are offered by insurers and manufacturers; compare prices and terms
"Can an extended warranty save money? The anticipated cost of a repair may be less than you imagine.
Many warranties are sold on the basis that, if there is no claim for a certain period of time, the premium is returned. However, policyholders may find that the firm has gone into administration (such as PowerPlan, sold through Scottish Power) or that it has not passed on their funds to the underwriter - if so, no claim can be made to the Financial Services Compensation Scheme.
Consumer rights campaigners say the government should stop retailers selling extended warranties on the day of purchase, and should properly regulate the market.
"Lower-cost appliance cover is offered by Warranty Direct (warrantydirect.co.uk) and Insurance Domestic & General (domgen.com).
From The Scotsman