Know your insurance coverage before deciding on an extended warranty

Posted on June 22nd, 2011 by Seth Oliphant

You’ve been eying that expensive flat-screen TV for months, and it finally went on a sale for an unbelievable price. As you rolled up to the cashier with a television the size of a bed sheet, you may have been faced with a question you weren’t prepared for: do you want to buy the extended warranty?

Checking your renters or home insurance policy probably wasn’t top of mind when you were dreaming about high-definition picture quality, but understanding your coverage is a good idea whenever you make big purchases.

Consider these three tips from the National Association of Insurance Commissioners to help you weigh the extended warranty decision:

  1. Know the difference between insurance and warranties. Manufacturer warranties cover repair needs if a product malfunctions during a certain period of time after purchase. Extended warranties offer extra protection for repairs after the manufacturer warranties expire, and some policies include accidental damage coverage. But extended warranties are not insurance. For example, they don’t cover theft, the way insurance would.
  2. Check your home insurance or renters policy to learn what household items are covered in case of theft or damage, as well as any exemptions. The amount of coverage varies according to the policy. Cash-value coverage factors in depreciation and reimburses you for the value of the property when you make a claim. Replacement-cost coverage reimburses you for the cost to buy a new item to replace the property.
  3. Check with your insurance agent to see if your new purchase would exceed the threshold of your home or renters insurance policy. If so, you might want to consider an insurance rider to cover your new valuables.

Meanwhile, update your home inventory. Add new valuables to the list, and make sure your current insurance provides the right amount of coverage. A complete inventory eases the process later in case you have to make a claim.

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