Extended warranties: Should you just say no?

Readers weighed in heavily last week against buying extended warranties for most products, after last Monday's column about a Haddonfield woman who ran into trouble getting Sears to deal with her broken-down dishwasher.

Several complained of getting the hard sell for coverage, even when they were buying furniture. But getting their warranties enforced was another matter altogether.

Diane Sufler of Huntington Valley says she was promised a warranty that covered “everything, even cigarette burns and punctures” when she bought a leather sofa set several years ago at a Willow Grove department store. It was a promise that should have reminded her of the adage, "If something sounds too good to be true, it probably is." But it's hard to fault her for trusting what she was told by a reputable retailer.

My husband has never, in fifteen years of marriage, bought an extended warranty on anything. He is of the opinion that they are not worth it, as whatever goes wrong is usually excluded. Unfortunately, he was not with me when I bought the furniture, and I succumbed. My feeling was that this furniture was going to be in my family room and, with two children and a cat, was going to take a beating.
In May 2004, I called as my cat had caused small scratches in the sofa and chair. I was informed that damage caused by pets was not covered. I commented that the salesman had told me "everything" was covered and searched the literature I received with the warranty for any reference to pet damage. No exclusions are noted. Score one for my husband.

That wasn’t the end of her frustrations. Sufler also tried to invoke the warranty a while later after trying unsuccessfully to remove a spot from the sofa. After about three months’ worth of frustrating phone calls and, finally, a visit from the outside company servicing the warranty, she got an offer: She could pick a new sofa that sold for up to $630, or take $200 in cash – exactly what the warranty had cost her.

That would be like paying $1,000 for homeowners insurance and having the company offer you your $1,000 back when your house burns down. Is that how a warranty is supposed to work?

Other readers argued that thinking of extended warranties as insurance illustrates why they are generally such a bad deal – a point that Jerome Bacchetti of Moorestown says I missed in last week’s column

Any insurance, Bacchetti writes, is worth buying only if the loss you’re insuring against could cause you serious economic harm. Otherwise, it’s a losing proposition, because you’ll be paying for covered losses plus the insurance company’s cost of doing business.

Example 1: You are the sole bread winner of a family in which several minor children depend on your income. If you died or became disabled, the family would be in serious trouble. You must have high levels of life insurance and disability insurance.

Example 2: You buy new tires for your car every few years. You can afford the loss of a tire from a “road hazard.” It makes no sense to buy road-hazard insurance, since over the years you will pay more for the insurance than for replacing damaged tires.

Appliances tend to fall in the same category as tires. They are highly reliable, don’t cost a lot to replace, and an annual repair bill costs about the same as the annual insurance premium. Plus, without the insurance, you have more control over who will do the repairs.

Bacchetti would forgo coverage on a computer for those reasons, plus one more: We know we’ll want the latest gizmos, anyway. “If one breaks,” he says, “it gives us an excuse to buy a new one.”

Fred Schumacher of King of Prussia says he’s ready to respond whenever a sales clerk pushes an extended warranty by “citing all the dire things that could go wrong”:

The answer is, of course: If it’s that bad, maybe I shouldn't buy this.

Schumacher continues:

Another aspect to consider is what reliability people call “infant mortality,” which says that if something is going to fail, it most likely will fail early in its life and then be failure-free for X number of years; then failures will occur more frequently as time goes on, till the product’s end-of-life is reached. I'm sure that manufacturers have this information on each of their products. It would be nice to see them, but I'm sure that [companies keep this] confidential. …

I have a rule of thumb, that if an appliance is over 10 years old and it fails, just get a new one, don’t even call a serviceman.

Other readers warned of pitfalls lurking in the fine print. For instance, Richard Herbert, of Oxford, Pa., was one of several who pointed out that some extended warranties don’t last as long as promised, because they begin right away, not when the original warranty expires.

And Chuck Kilian of Levittown reminded me about the confusion that results when both manufacturers and retailers offer coverage on the same product – confusion that almost proved costly to his 78-year-old mother, who was baffled when she got a letter recently from General Electric offering her extended-warranty coverage on her dishwasher. Hadn’t she bought the four-year extended warranty when she purchased it?

Kilian eventually straightened things out: The warranty came from the retailer, a home-supply chain. But Kilian wonders how often consumers wind up with worthless double coverage. “What a racket!” he says.