As part of my other job – selling telecommunications services and products – it is my duty to inform customers about options to help protect their investments. Chances are that you were offered one of these the last time you bought a computer, digital camera, cell phone or even a more basic item. I have to admit that I am skeptical about many of them, even though logically I understand that they make perfect sense. Some plans are much more worthwhile than others, and therein lies the challenge of not automatically refusing every single offer to extend your warranty.

When deciding whether or not to opt for such protection, it is important to consider several important factors. The most important is not even how much the item costs.

Things to consider:

• How important the item is to you. In other words, if it stops working can you live without it? And for how long? Do you rely on it to get important things done?
  
• How much will it cost you to replace the item? Depending on the cost of the product you may not have that money available to spend if something goes wrong with it.
  
• The likelihood of this particular item being defective or having problems with it. The more technologically advanced a product, the higher the chance of its having problems beyond the first year.
  
• Is the extended service plan to be paid off all at once, or is it paid off over time? $90 in one lump sum is far less appealing than $2.49 every month for 3 years, right?
  
• What does the service plan cover? Manufacturer’s defects? Accidents? Liquid damage?

Example:
You purchase a $20 computer keyboard and the salesperson offers you an over-the-counter exchange for 3 years and all you have to pay is $10. At first glance, this seems like a rip off, right? “I can buy a whole new one for just $20, so no, I’m not gonna buy a warranty for $10!” you might say.

1. A computer keyboard is something pretty crucial if you own a desktop computer, so if yours stops working you will NEED a new one. Some items may not HAVE to be purchased right away but in this case you cannot effectively operate the computer without it.
   
2. The keyboard is not expensive but $20 is TWICE the amount of a warranty that covers you for three years, and you may have yours replaced several times during that time. So you would spend more money to buy ONE new keyboard than it would cost to potentially get several replacements.
   
3. The likelihood of a keyboard having problems with it depends on how complex it is. Ones with shortcut buttons, volume controls, etc. will lose some of the selling features if those stop working, reducing it to a pretty but standard keyboard.
   
4. Although the service plan is paid in one lump sum, one can hardly say that $10 is unreasonable. Despite the fact that it costs half as much as the item itself, for $30 the purchaser receives a new keyboard and the guarantee of always having a keyboard for the 3 years.
   
5. In the case of a keyboard, the chances are high that the damage may happen due to a spilled drink, for example. If the warranty were to cover everything BUT that, it may be a reason to steer clear.

It is also important to understand the details of the replacement process. Will it be a refurbished item or a brand new one? Will it be repaired or simply replaced? Will the work be done by the manufacturer of the item or by the staff of the store from which you purchased the item? Is there a deductible (portion of the claim that is not covered by the service plan), and if so how much?

Personally, I believe that certain items should always have extended service plans attached to them if they are reasonably priced, have appropriate coverage and the customer can afford to pay for it.

Notebook Computers

Having once worked for a major computer manufacturer, I am familiar with the extended service plans associated with them. I think that any service plan is beneficial for computers that will be toted all over the place and submitted to risky conditions much of the time, what with their portability. The ultimate plan, though, is one that covers accidents. There are SO many ways in which a laptop can become damaged. Spills, falls, clumsy friends, pens/pencils on the keyboard while closing the lid, etc. For many people, computers are their life, their everything. How can we be so illogical sometimes, to not protect our investments? *In a previous job doing computer sales over the phone, I persuaded a customer to get our accidental damage plan(mind you, I served US customers and THEIR plan was much cheaper and they had options of 1, 2 or 3 years) for her laptop, and a couple of weeks later I received a call from the same customer, saying that she had spilled a glass of wine on it. Covered!* $489 may seem expensive but depending how much your laptop cost, to know that for 3 years if anything goes wrong with it accidentally gets damaged, that you're covered - that peace of mind is worth it to many people.

NOTE: Dell has a lot more options for their warranties, it seems.

Cell Phones

In Canada, we often don’t pay much for cell phones because we enter agreements with service providers to stay with them for years. The cost of the phone is then subsidized because that provider knows they will either have us as a customer for all those years or we will have to buy our way out of the contract. Because we often pay very little for phones, our perception of their value is severely skewed. If something happens to our phone, we will then have to find a phone to use. A basic brand new cell phone can often cost $200 or more. Warranties guaranteeing a phone to use can sometimes be half of that cost, covering the item for up to three years. *I sold a cell phone to a customer the other day, and she took the Extended Service Plan (that covers, among other things, liquid damage) and I got a phone call later that day from her, telling me she dropped it in a puddle (good ol' sloppy Maritime weather). Luckily her 3-hour old cell phone was covered* This particular plan is $2.49 per month on the bill, and gives you quicker replacement, covers liquid damage and will also give you warranty coverage beyond the first year as long as you continue to pay monthly - and yet some people SOMEHOW don't see the value in it.

Here's my advice to you: The next time a salesperson starts to talk about an extended service plan, hear them out. It might REALLY be in your best interest. Don't think "oh, it'll never happen to me" because as our very own blogger, George, is going to explain in a few weeks: unforeseen things can happen to your possessions. The question to ask yourself is not always can you afford to buy it, but rather can you afford NOT to buy it? Anybody have any horror stories about NOT having gotten one, or a positive story where an Extended Service Plan saved you? Post them here!