Are Home Appliance Warranties A Good Idea

Q: I got an offer for a home appliance warranty in the mail.  Do you think that it’s worth the cost? Hector, Elizabeth, NJ

A: The strength of a warranty or insurance of any kind ultimately depends on the legitimacy of whomever is offering it.  Insurance companies are better equipped to process claims than an appliance company, so if you have a warranty directly with an appliance company, expect long wait times and red tape when something goes wrong with your appliance.  In addition, expect to pay an additional service fee if your appliance breaks down in addition to the premium that you’ve been paying.  I was an actuary for an insurance company in a former life and the fact is that any insurer can deny a claim–this is why insurance is a great business for the insurer–the insurance company gets to demand premium payments from you and then gets to decide whether they want to pay your claim if and when something goes wrong.  I have been burned in the past on an appliance warranty that I got through my local utility company.  When the dishwasher in one of my apartments stopped working, I tried to submit a claim and they denied the claim because they said my dishwasher was too old or the model wasn’t covered.  Generally speaking, it is normally cheaper and easier to replace rather than fix a defective home appliance, so my advice would be that rather than pay for a warranty for a home appliance, save your money to buy another appliance if necessary if your appliance stops working.  On the other hand, if you get an appliance warranty for free, there’s no reason not to take it but I wouldn’t pay for an appliance warranty.  Thanks for your question, Hector. 

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