When Abby Speed was in Puerto Vallarta, Mexico two years ago, she left her $300 (R2,294) camera in her purse on a table at a cafe. Both disappeared.
Luckily she had invested in gadget insurance, so her camera (along with her laptop, cellphone and other electronics) was covered for theft with a $50 deductible. Speed says she is glad for the peace of mind that comes with paying a couple of hundred rands a year to cover all of her electronics.
“I travel a lot,” the 29-year-old activities director says. “Things get broken or stolen.”
With as many gadgets as many people now carry, the game has changed for consumers when it comes to warranties and specialized insurance. There’s no longer a simple answer.
Part of the problem comes with the portability of the devices. Some people go everywhere with a pricey gadget like an iPad. One big drop or an errant cup of coffee can be disastrous.
Marketing director Aaron Cooper says the top three claims categories for gadgets are: cracked screens, theft and water damage.
Insurance vs. Warranty
The differences between gadget insurance and buying a special warranty can be subtle, but theft is one category covered by insurance but not in a warranty. Warranties are connected to mechanical failure while insurance is more built around human error. And insurance can be purchased at any point, while extended warranties usually have a time limit, often within 30 days of purchase.
Cooper says one thing that consumers often overlook is the real cost of their gadgets. You might have paid $200 (R1,530) for your iPhone, he says, but that’s because it was subsidized by the phone company. If you drop it in the toilet, the replacement cost could be closed to $700 (R5,350).
What you really need is complete cover for your electronic devices, from an iPad to a flat-screen TV, either ala carte or in a package.
If, for example, your iPhone starts breaking down, its most likely due to an accident – something which isn't covered by either Apple's original warranty or its own add-on warranty program.
“First, more of the electronics we buy are mobile and have a high propensity to fail when dropped,” says CEO Steve Abernethy. “So tablets, smart phones and laptops are much more common than desktops and simple-feature phone purchases. What consumers now care about is as much about protecting themselves from klutziness as it is about the reliability of the item, because these devices don’t like to take a drop on concrete or take a bath in a bad coffee spill. So warranties have much higher utility for more people by covering accidental damage from handling.”
Avoid the extended warranty
The danger of the point-of-sale warranty extension for most consumers is simply not knowing what they’re paying for. And since sales people usually get incentives to sell the warranties, they’re not the most objective source of information.
For consumers, it comes down to deciding whether you want coverage beyond the traditional one-year factory warranty, which typically doesn’t cover any sort of accidental damage. And then, whether the likelihood of you having an accident with the device is worth the price of additional coverage.
Cooper suggests that if you have a cheap phone or laptop, then getting the extra coverage doesn’t make a lot of sense. But if the replacement cost is high, then it’s worth considering.