When you buy a consumer durable good—be it a refrigerator, washing machine, laptop, TV, or phone—it typically has a manufacturer's warranty of one year. But some stores and companies now provide the opportunity to buy an extended warranty, where the repair or replacement beyond the standard warranty period is covered. It sounds like a fine way to guard your investment, but not all extended warranties are created equal. Knowing what they do, how much they cost, and when they are good ideas can make you more informed.
What is an extended warranty?
Extended warranty is a voluntary service agreement providing repair or replacement protection to the product upon expiry of the initial manufacturer's guarantee. This can be typically purchased from the manufacturer of the product, its dealer, or any third party selling warranty products. The extent of coverage ranges between one to five extra years and may also accompany some conditions, terms, and exclusions.
Extended warranties typically are pitched as protection against surprise breakdowns, particularly for high-cost items or electronics with high repair costs.
What is typically included?
Extended warranties typically include mechanical or electrical failures that are not due to accidental damage or abuse. For instance, if the motor in a washing machine breaks down or a TV no longer functions correctly after the manufacturer's warranty has expired, the extended warranty might cover the cost of repair or replacement.
But they generally do not cover damages due to water, physical damage, voltage fluctuations (except if specifically mentioned), or wear-and-tear components such as batteries, hinges, and cables. Extended warranties can also stipulate that you keep the product according to manufacturer instructions to stay within the cover.
How much does it cost?
The cost of an extended warranty will depend on the value of the product, its brand, and duration of coverage. It would typically be between 5% and 20% of the purchasing price of the product. For expensive items, the amount could be substantial. As an example, a refrigerator worth ₹50,000 with a three-year extended warranty could cost between ₹2,000 and ₹7,000 depending on the company and coverage terms.
A few credit cards and upscale retailers provide free extended warranty as part of their credit or loyalty programs, so it is well worth inquiring if you are already eligible through those means.
Should you purchase one?
Whether to purchase an extended warranty is based on the product category, its reliability, cost of repair, and your own risk tolerance. For inexpensive items or brands that are known to be long-lasting, the expense of an extended warranty might not be worth it. But for high-end
electronics or appliances with costly repair components, an extended warranty can bring peace of mind and possible savings.
It is also more helpful for goods that you intend to consume over their usual lifecycle—like major appliances or high-end laptops—and not as helpful for items such as cellular phones that are frequently replaced within two years.
Things to watch out for
Before purchasing an extended warranty, it’s important to read the fine print carefully. Look at what’s covered, the claim process, service availability, turnaround time, and exclusions. Also, verify whether the warranty is from the manufacturer or a third-party—many third-party warranty providers may not have strong service networks, leading to delays or complications.
Make sure the warranty kicks in only after the manufacturer’s warranty ends and not during the overlap period. Additionally, confirm whether on-site service is offered, or if you’ll be required to transport the product to a service centre.
An extended warranty can be a worthwhile add-on for costly, repair-intensive products—but it is not always a must. Consider the product's reliability, repair costs, terms of the coverage, and your habits before signing up for one. In certain situations, putting money in a personal repair fund will better suit you than forking over cash up front for coverage you might never need.
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