Extended Warranties in general - reading the fine print

[Cap'n Preshoot]

In this thread I'd like to avoid pointing anyone toward any specific plan or discussing the merits of one plan over another. I'd also like to avoid the politics of whether an extended warranty is even a good idea or not. There's already plenty of pros and cons on both sides of that argument. Just the fact that you're here we'll assume means you're interested or looking for more information.

What I'd like to do is spend a little time exploring the fine print of the typical extended warranty plan, what's typically covered, what's typically not covered, the traps you can fall into and help others through the process of understanding what to expect.

Here in the first post I think it might be worthwhile to start by pointing out that your "extended warranty" is not really a warranty at all, nor is it an insurance policy. Rather it is a contract between you and the plan provider which has some limitations.

Different plans have different rules, but in virtually all cases I'm aware of, the "extended Warranty" plan for your new widescreen TV has one very hard and fast rule which is that the maximum amount of coverage (protection) will never exceed the manufacturer's suggested retail price you paid for the TV. This "total" by the way, does not include tax or delivery. It is only the price of the TV.

What this means is if for example you bought a $3000 television, the maximum total of all claims combined cannot exceed a grand total of $3000. Once the plan has paid total claims when taken together add up to the $3000 price you originally paid for the TV, the plan is all used up and you have no more coverage, even though there may be several years still remaining in the term of the plan. A good way to think of it is $3000 or 4 years, whichever happens first. It either runs out at the end of 4 years or it runs out when a total of $3000 in claims has been paid.

This is important to understand, because if you've had a previous major repair that (for example) cost the warranty company $1000, the total amount of remaining coverage is now just $2000 instead of the original $3000. At this point there's no longer enough remaining coverage to "replace" the TV if it subsequently dies and is not repairable.

For this reason you might want to ponder the wisdom of filing claims for trivial repairs. Is it better to submit a claim for a $250 lamp thereby reducing your remaining coverage, or pay for the smaller repairs out of your pocket and leave the full amount of the plan intact? I cannot tell what is best, I'm just trying to make you think before pulling the trigger.

[Cap'n Preshoot]

WHAT IS COVERED AND WHAT ISN'T

Generally speaking....most extended warranties cover most (but not all) of what the original manufacturer's warranty covers. These are normally the electrical components and circuitry inside the television that fail under normal personal/private residential use.

Items most likely not covered by an extended warranty plan are the hardware items and breakage. In other words, things like the bezel or trim around the edge of the screen, the outer case of the TV, even the screen itself (unless you have a policy that specifically states that it covers the screen). Even policies that provide a replacement screen may not replace one that has been scratched or had a beer bottle thrown through it. Unless clearly stated otherwise, these policies cover a screen that fails under normal use. Obviously when your three-year old son or daughter scratches it with a toy or throws something through the screen, or you damage it with any type of cleaning product, the warranty company is unlikely to stand the cost of that repair.

Electrical surge damage (but not lightning damage) is covered by some plans and specifically excluded by others. Whether your plan provides for surge damage or not, it would be an excellent idea to purchase a high quality surge protector. Surge protectors are rated in "Joules" (pronounced like jewels) and the higher the Joule rating, the better. Aim high. A recommended surge protector should provide 3000 Joules or higher as well as provide you with insurance in the event your TV sustains surge damage. Here's one that does: http://www.tripplite.com/products/pr...?productID=142. Please read the product literature as some of these require that you register to have the insurance protection.

None of the extended warranty plans I'm aware of provide lightning protection. Lightning is considered an act of nature. A high quality surge protector will often protect against nearby lightning strikes that enter through your electrical service, but will not help if your home receives a direct strike. In case of a direct hit by lightning, your homeowner's insurance policy may help, but most homeowner's policies have a one-time maximum total claim limit (or cap) of $2000 for "electronics". Check with your insurance agent before you have a claim. Special additional coverage for your electronic items is ordinarily available upon payment of a slightly higher premium.

Your extended warranty will not cover loss due to accident or water or flood damage, fire, wind, earthquake, theft or loss of use, mold, rodent or insect infestation, or building collapse.

Your extended warranty will ordinarily cover equipment that is only used in your home. None of the extended warranty plans I've seen cover equipment that is used in any commercial endeavor, i.e., such as a sports bar or any place of business.

The extended warranty plan that you purchased only applies to the one specific TV is was purchased for. In the event of a total loss, where the warranty company replaces your TV, your extended warranty plan immediately expires. In other words, the TV you receive as the replacement has no coverage and you must purchase a new plan if you would like to continue coverage. If the manufacturer replaces your TV (or you exchange it) you must immediately contact your extended warranty plan administrator to transfer your plan to the exchanged set. This can sometimes be a hassle. Most plans have some provision for this but not all do.

Some plans provide for replacement of the projection lamp and some plans do not. Read your contract (the fine print) to find out for sure. Some plans provide a separate policy for lamp coverage, but cover only the lamp and not the labor charges to replace it.

It is your responsibility to keep accurate and complete records and to be able to make those records available when you have a claim. Not all warranty plans require this, though most do and a couple of them can be quite about it, even to the point of disallowing a claim. The importance of keeping purchase receipts together with your warranty registration paperwork cannot be stressed strongly enough. These are very important papers. Some warranty plans also require that you immediately register them (within 10 days of purchase). At time of registration you will be required to provide the model and serial number as well as purchase date and the price paid (as shown on your sales receipt).

In the event of a claim, you must contact the warranty plan administrator before having the TV repaired. They will assign a claim number and they will usually make the arrangements for service. You will ordinarily not be able to specify the shop you wish to have do the service unless your preferred shop is one of the servicers with whom your plan has a service agreement.

Is the warranty plan obligated to give you an exact replacement? No. They will normally repair your TV using only new, factory original parts, but they can also use refurbished parts, salvaged parts as well as parts from other manufacturers. In the event of a total loss the warranty company will ordinarily attempt to replace your set with an exact replacement -if one is available- However, if an exact replacement is not available, they will ordinarily offer you a replacement that is of equivalent size and cost. In cases like this you may also have the option of requesting a cash settlement.

One recent question I received had to do with the amount of the cash settlement. In this particular case the individual was able to purchase his original TV through a wholesaler for 40% below the manufacturer's suggested retail price. His question was how much he could expect to receive from the warranty plan in the event of a total loss.

The language in these contracts is pretty clear in this regard. They will attempt to repair or replace the set. If they cannot repair or replace it, the amount of your settlement will be the amount that you originally paid, minus the amount of prior claims, minus sales taxes and delivery/setup charges, as evidenced by the original sales receipt. In other words, the most you'll ever get is what you originally paid, but minus tax & delivery fees.

If you sell your set (or give it to another family member), most extended warranty plans can be transferred to the new owner. Some plans do not charge to transfer the warranty, while others charge only a minimal amount. Check the language in your own plan to find out the details.

[lcaillo]

Thank you for sharing your research and what you have learned. It is one of the best resources on the web for EW shoppers.