Are Protection Plans for Electronics Worth It?

Portrait of salesman helping to woman to buy a new digital device in tech shop.
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If you’re thinking of buying a loved one a new Apple Watch, noise canceling headphones, a photo printer or one of the many other “best electronic gifts” for 2022, as chosen by Real Simple, lucky them! But you also may be wondering if gifting your recipient with an added protection plan is a good idea.

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When you buy the item at the store, the cashier might ask if you want to opt into a protection plan through the retailer, which is basically an extension of the manufacturer warranty and an “upsell,” as PC Mag indicated. Most protection plans promise to provide repair or replacement (depending on the plan) if something happens to the purchase.

As PC Mag further explained: “Getting a protection/service plan means you pay more upfront, depending on the item and the coverage. In theory, you do so to make sure you have even more time with the product should it break in that pre-set amount of time, be it a few months, a year, or a few years.”

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Are Protection Plans Worth Buying?

It sounds good — people commonly pay for medical insurance, car insurance and life insurance, after all. But is insurance on an electronic product a good deal?

“Don’t waste your money” seems to be the resounding consensus. 

While the plans do seem affordable (they can be as low as $40-50, per PC Mag), the outlet indicated that these third party companies are offering them because they know “service plans make crazy amounts of money.” 

As the magazine detailed, “The market for such plans (including for automobiles) was worth $120.79 billion in 2019, and during the summer of COVID (in 2020) was projected to hit $169.82 billion by 2027, according to Allied Market Research.”

Even Consumer Reports stated that protection plans are “cash cows” and “it’s money down the drain.” As they explained, “Stores keep 50% or more of what they charge for these contracts. That’s much more than they can make selling products.”

Consumer Reports offered a few good reasons to skip on the option when offered at the store’s checkout area, whether the purchase is for you or a gift.

Manufacturer’s warranties will likely cover what you need fixed. It’s almost like the fallacy of needing rental car insurance if you already have a personal car insurance plan for your vehicle that covers rentals. In the case of electronics, “Buying a service plan may duplicate coverage you already have,” Consumer Reports indicated, noting that manufacturer warranties are usually good for at least 90 days.

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If you need a repair, you can just pay out of pocket. Most repairs won’t break the bank, per Consumer Reports. The publication cited a survey which showed that “repairs, on average, cost not much more than the average cost of a service plan. The median difference in our latest survey was $26.”

Recalls are still a thing. If there’s a glaring problem that is affecting mass amounts of the product, the manufacturer will probably be inclined to fix it on a larger scale — and on their own dime. This happened not too long ago with a glitch on the iPhone 11 — in response, Apple made many models eligible for free service.

Credit cards sometimes offer coverage, too. Always buy electronics with a credit card, Consumer Reports suggested: “Many credit cards automatically extend the manufacturer’s warranty up to a year or so on many products purchased entirely with the card. The coverage is free.”

The protection plan may offer subpar service. Just because you are protected, doesn’t mean necessary repairs will happen easily or quickly. Consumer Reports cited several surveys on the topic which found that “17% of those who had an appliance repaired under an extended warranty said it took an unreasonable amount of time to get it fixed, compared with 9% of those who paid for the repair out of pocket.” As well, “23% of those who had an appliance repaired under an extended warranty complained that it took more than one try to get it fixed right, compared with 15% of those who paid for a repair themselves.”

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Rather than buying into a protection plan, many experts say that there are a few steps you can take to make sure you are making a good purchasing decision:

  1. Do your research before buying. Put off those impulse buys (even when it comes to gifts) and look into consumer reviews, whether it’s a TV or an appliance.
  2. Read the fine print. Look at a manufacturer’s warranty before buying the item. Some brands may have better policies than others. As PC Mag stated: “By federal law, if you buy something for over $15 new at a retailer, they have to let you see any written express warranty.” It may be worthwhile taking the time to read the fine print. Also, stores that have a clear return policy and explicit warranty are the ones to buy from.
  3. Save your money for repairs instead. Rather than investing in a protection plan, put aside that money into a savings account in case you do need to make repairs (or buy a replacement) in the future.

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About the Author

Selena Fragassi joined GOBankingRates.com in 2022, adding to her 15 years in journalism with bylines in Spin, Paste, Nylon, Popmatters, The A.V. Club, Loudwire, Chicago Sun-Times, Chicago Tribune, Chicago Magazine and others. She currently resides in Chicago with her rescue pets and is working on a debut historical fiction novel about WWII. She holds a degree in fiction writing from Columbia College Chicago.
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