Are Protection Plans Worth It?

Chances are every time you buy an electronic at Best Buy, Target, or pretty much anywhere, the cashier or salesperson asks if you’d like to buy a protection plan.

They tell you the cost and it sounds minimal, so you probably consider it, but should you?

Since no two protection plans are created the same, we’ve created this guide to help you understand if protection plans are worth it and if so, when.

What is a Protection Plan?

A protection plan is an extended warranty or a warranty that starts after the manufacturer’s guarantee expires. It covers the cost of repairing or replacing the item if damaged or it stops working, but only in certain situations.

Some protection plans cover devices only if they stop working after normal use. Others also provide coverage for accidents such as spills or trips and falls.

It’s important to read the fine print to know what a plan includes before deciding if it’s right for you.

How Does it Work?

Protection plans are sold by third parties, but you can often buy them when you buy the product. For example, if you buy a camera from Target and you buy a protection plan, you’re buying an Allstate plan but paying Target for it.

After you buy the plan, you register it and upload your receipt to prove your purchase. You can manage your plan online ahead of time so if you have a claim down the road, you don’t have to scramble to find your receipt to make the claim.

When you have a claim, you need your device, receipt if you didn’t already upload it, and the information about the damage.

You file the claim online with most companies, otherwise, they give you a phone number to call. You provide information about your product and the damage that occurred and they will render a decision.

The decision depends on how your item was damaged and if it’s a covered occurrence. For example, if the policy covers spills and you spilled your coffee on the camera, you could file a claim. But if the policy doesn’t include accidental damage, you wouldn’t be able to file a claim.

If you have a covered repair, the next step is for the insurance company to determine if the product can be repaired or must be replaced. If it’s a repair, they typically send you a prepaid label for you to ship the product to them and they’ll ship the repaired product back to you for free.

If the item can’t be repaired, they might replace it with either a new product or a refurbished product (always read the fine print).

Reasons to Buy a Protection Plan

Even though protection plans increase the cost of your purchase, there are some reasons you may want to consider one.

You’re on a Tight Budget

If you’re on a tight budget and replacing the item you’re buying if it breaks would be difficult, the protection plan can be valuable. You’ll pay a small fraction of the product’s price and be able to protect your purchase should something happen to it. This gives you a little more life out of the product as most protection plans are good for 2 – 3 years after the manufacturer’s warranty expires.

You Need Peace of Mind

Buying a costly electronic is an investment. If you are worried about what might happen to it, buying the protection plan could give you peace of mind. Knowing that if it stops working or you have an accident you can get it replaced or repaired can be important to you.

You’ll get Certified Repairs

If/when the product breaks, you’ll know you have certified technicians working on it. If you bring the product somewhere else without a protection plan, you might not have brand experts working on it and could put the product at risk of not working again.

You Keep your Products Long-Term

If you like to keep your electronics as long as possible, a protection plan can help you. If the item breaks or stops working within the timeframe of the protection plan, you can get it repaired or maybe even get a replacement, which would give you a few more years of life for the product.

Reasons not to Buy a Protection Plan

Just as there are reasons to buy a protection plan, there are some reasons not to buy one too.

The Manufacturer’s Warranty may be Enough

Before you buy a protection plan, look at the manufacturer’s warranty. If it provides coverage for a while, the extended warranty might be useless, especially if it doesn’t cover accidental damage. You might not keep the product long enough for the extended warranty to be worth it.

It Might not Cover what you Need

Don’t assume that a protection plan will cover any issue you have with the product. They are usually pretty finicky about what they will and will not cover. For example, if it covers accidental breakage, but not if it occurs in a car accident and that’s how your item was broken, the protection plan will be useless.

You Might Have Coverage Elsewhere

You might not even realize it, but your credit card might cover your electronics purchase. Many credit cards include extended warranty benefits but without reading the fine print, you wouldn’t even realize it.

Before you buy an extended warranty, look in other areas such as your credit card benefits or benefits from any organizations you belong to, and see if you already have protection that you don’t have to pay for.

What to Look for in a Protection Plan?

If you decide to buy a protection plan, here’s what you should consider.

What Does it Cover?

Read the fine print and know what it will and will not cover. Are power surges covered? What about spills or accidents?

Will they Repair and/or Replace the Item?

If the item is covered, find out how they will handle it. If they will repair it, do you ship it to them? If so, who pays for shipping? If they replace it, will it be a new or refurbished replacement?

When does it start?

If you don’t have accidental coverage, the protection plan coverage might not start right away. Find out exactly when it would start and compare it to how long you intend to keep the product to see if it’s worth it.

How do you File a Claim?

Online claims are the easiest because they are convenient and you can get an instant answer. Find out how the company requires you to file claims and how long it takes to provide an answer, do the repairs, and return the product to you.

FAQs – Are Protection Plans Worth It?

Can you cancel an extended warranty?

Each company has different answers to this question, but typically you have a short window of opportunity to cancel a warranty you bought. Before you check out, find out the ‘look period’ and make sure you decide within that time if you still want it or if you’re having buyer’s remorse. Also, find out how to cancel it should you decide to do so.

Do you need to activate an extended warranty?

You typically don’t need to activate an extended warranty – they automatically begin when the manufacturer’s warranty ends. If you bought accidental coverage too, the coverage usually starts right away. Always ask before buying the policy so you know for sure. 

Some companies ask that you register your policy online after buying it at the store to make record-keeping and filing a claim easier.

What products can you buy a protection plan on?

Today there are protection plans for just about any product. Electronics are the most common, but you’ll find them on furniture, baby products, and toys too. Anything that is of decent value and has the potential to stop working usually has a protection plan available.

Can you transfer protection plans to someone else?

Most companies allow you to transfer the protection plan to someone if you gift the item or sell it to someone. You just need to call the customer service number and tell them to whom you transferred the item so they can transfer the policy to the new owner.

Final Thoughts – Should you Buy a Protection Plan?

It’s not very often that you should buy a protection plan unless you are the type that constantly drops electronics and/or spills on them. If you’re buying it just to lengthen its life or protect it from breaking prematurely, chances are anything that would go wrong with it would be during the manufacturer’s warranty period and will be covered without you paying any extra money.

If you decide to buy one, compare your options and know if you’re buying general coverage, accidental coverage, or both. Know how to file a claim, how long you’d be without your item, and the policy if the item can’t be repaired.

Kim Pinnelli is a personal finance freelance writer and contributor. She lives in the Chicago suburbs, writing from home for the last 13 years. Kim enjoys helping people understand personal finances and writes on topics about saving money, investing, planning for retirement, and ways to increase income. In her free time, Kim enjoys hanging out with her 3 children, reading, crocheting, and spending time outdoors.

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