An extended warranty works like an insurance contract for the product you purchase and is typically sold by the retailer at the point of sale. An appliance extended warranties cover individual major home appliances like refrigerators, dishwashers, ovens, cooktops, clothes washers and dryers, and water heaters.
It’s important to realize that retailers offer warranties for a simple reason: They make them money. According to data from Allied Market Research, the global market for service contracts reached $120.8 billion in 2019 and is projected to hit $169.8 billion by 2027.
How Much Do They Cost?
Warranty prices depend on several factors, including the type of appliances being covered, the type of coverage you want, your warranty provider, and where you live. In general, a home warranty can range anywhere between $300 and 600 a year, or $25–$50 a month.
An extended warranty is usually less expensive because it covers only one appliance. They can cost around $20 for smaller appliances and upward of $120 for larger appliances.
Are Extended Appliance Warranties Worth It?
Appliance extended warranty coverage differs depending on the specific warranty plan. Some coverage lasts a short period, while other plans last years, and particular parts coverage and conditions vary. These contracts are often similar to the original manufacturer’s warranty they just extend the period of time you’re covered.
An extended warranty or service contract might not be worth the cost if a product isn’t likely to need repairs. Let’s look at a few pros and cons of an extended warranty:
Pros of an Extended Warranty
Having a warranty helps to get an appliance fixed as soon as possible. You know how much you’ll have to pay monthly or upfront for the coverage. On the other hand, without an extended warranty, you may be left with a large, unexpected expense if the appliance breaks down.
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When you opt for the warranty, you’ll know from the start how much you’ll pay for it. Most warranties require you to pay the full amount at the time of purchase. There are no maintenance fees or other hidden charges.
You can rest assured that a qualified technician will make potential repairs. If you get an extended appliance warranty and encounter a situation where your appliance needs to be repaired, you will get help from an experienced appliance repair technician. This also helps take the guesswork out of knowing who to call to get your appliance back up and running.
You Can Extend the Warranty to Suit Your Needs
When you purchase a new appliance and get a standard manufacturer warranty, you’re limited to their warranty terms. However, if you opt to extend your warranty—either through the manufacturer, the retailer or a third-party service provider—you can get coverage for just about any amount of time.
May Be Transferable
You may be able to transfer it when you sell or give away your appliance. This added benefit will help you net a higher price on the secondary market and give potential buyers the peace of mind you once enjoyed.
Cons of an Extended Warranty
May Not Be Used
Some people never use a warranty, which can make it feel like a waste of money in the end. Extended appliance warranties are money-making products for businesses. That means, statistically, you are likely to spend more money on the warranty than you will ever need for coverage.
Must Purchase for Each Appliance
You have to buy a separate warranty for each appliance you’d like covered. This can add up to quite a bit when you consider all the appliances you have in the kitchen and laundry room. Alternatively, home warranties can protect numerous devices and home systems under the same plan.
How Do Home Warranty Claims Work?
If you have a problem with a covered appliance, you will contact your company to file a claim. Once the claim is processed, the company will schedule an approved contractor/technician to check on the problem. A service fee is paid at this point. The contractor will decide which solution is best for the appliance, whether that be a repair or a replacement.
The Bottom Line
Although warranties may seem like a nice perk that companies extend to consumers, they are actually carefully calculated to be profitable for the companies that offer them. Before you agree to insure your next big-ticket purchase against failure, carefully consider the likelihood that the product will fail, as well as how much it would cost you to repair or replace it. In many cases your best course of action is to bet that your appliances and electronics will outlast the warranties.
Extended warranties and service contracts aren’t the only way to plan for future repairs or accidents. After you evaluate the extended warranty or service contract coverage, you might find that putting money aside in a savings account is a better option. Then, if you need to pay for repairs, you can use the money in the account.