A Must Read Guide To Home Appliance Insurance

- by Becky Hall
How To Save Money On Fixing Home Appliances – Chapter Nineteen

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When you purchase a new appliance, you may be asked whether you would like to pay for an extended insurance. So, what does this mean and is it worth investing even more money than you are already paying for your expensive new home appliance?

Basically, an appliance insurance is a policy that covers the breakdown of the appliance that you are buying. Most insurances will either pay in full for you to repair the appliance or a replacement model will be supplied.




What does home appliance insurance cover?

A new appliance will always have a manufacturer’s warranty or a retailers warranty. This warranty covers the model for up to two years. But, you can also pay for appliance insurance also known as an extended warranty which can run for longer. The extra insurance can also cover accidental damage which may not be covered under the supplier’s normal warranty. Some home appliance insurances will run for up to ten years. The payment for the extra cover can either be a monthly amount or a lump sum. If you pay via a lump sum, the total and final price of the item will include this fee.

Let’s compare a manufacturer’s warranty with an extended warranty.

Manufacturer’s WarrantyExtended Warranty
Length of planUp to 2 yearsUp to 10 years
CoversFault at time of purchaseMechanical or electrical fault. (may cover accidental damage)
CostFree – included in purchase priceAdditional Fee

Like other insurance products, home appliance insurance may include some exclusions such as cosmetic damage to glass parts or delivery costs for a replacement model.

Is appliance insurance worth it?

It is worth remembering that retailers make a lot more money out of these warranties than they do on the actual appliance that is being sold. In addition, some sales people are expected to sell a specific number of these insurance products each month. These sales people will put pressure on consumers to buy an insurance plan. So, the first thing to beware of is being talked into an insurance product that is basically worthless or not value for money.

3 things to consider before you purchase appliance insurance in the UK

  1. Modern appliances are very reliable – Modern appliances break down less frequently and repairs are not too expensive. So, this is the first thing to consider before you buy extra insurance cover. Research shows that the appliance most likely to break down is the washing machine. This is an essential in any family so extra cover for this item may be worth considering.

  2. Look at the statistics – Just because an item could breakdown does not mean that it will. If you consider that absolutely anything in your home could break down, then you would insure every item against damage. You could spend hundreds of pounds a year on the possibility not the probability of breakdowns.

  3. Be wary of sales people – The business of selling appliance insurance cover is very big and profitable. What’s more, sales people earn more commission on these insurance products than they do on selling the appliances in the store. Check out any consumer website and you will find that most of them advise against extended warranties purely on the grounds of the high expense.



What to look for when buying an extended warranty

If you do decide to buy extended warranties for your household appliances, make sure you know what you need to look for. The last thing you want is to pay for an appliance insurance only to find that you are not covered in certain cases.

  1. The Length of the cover: Think carefully about how long the warranty is for and whether you really need cover for that length of time.
  2. New for old: Check whether the cover is ‘new for old’ in case a repair proves to be uneconomical.
  3. Exclusions: Check what the exclusions are. Think whether they are reasonable and if any of the exclusions are a possibility that may happen to you.
  4. Limits on number of claims: A warranty may put a limit on the number times you can claim or may cease to exist after one claim.
  5. Service agreements You should also be aware that some insurance policies are only offering a service agreement and do not cover breakdowns.

If you have decided that home appliance insurance is a good investment and can save you money but you need some help to finance the insurance you can apply for a small loan with Cashfloat


Benefits of home appliance insurance

  1. Having this cover in place means you do not have the worry and stress when something does go wrong.
  2. You do not have to find an unexpected amount of money, or take out instant short term loans to fix the problem.
  3. Having insurance means you don’t have to look for a reliable repair company.
  4. You will not have to manage without your appliance if you can’t afford to have it repaired or replaced.

However, one thing to note is that repairs under warranty might take a while longer. You are bound to go to the third party repair business that the supplier has an arrangement with.

What appliance are you buying?

If you are buying an appliance that is budget priced, you may feel that paying for insurance cover is worthwhile. However, if the item is over 5 years old and still covered you could discover that the company states that it is uneconomical to repair. You will then only get a proportion of the cost of a new one.

One way to cover costs could be to have a separate savings account into which you put a monthly sum to cover any repairs. In this way, you would at least get some small interest added to your money. The consensus is that buying an extended warranty will not save you money. It will give you peace of mind but at a high cost compared to paying for any repairs.



Is there an alternative solution to appliance insurance?

If you are seriously worried about an appliance breaking down, it may not be the best option for you to buy an extended warranty on each of your home appliances seperately. You can buy an insurance policy that will cover all your appliances. It will almost certainly cost less than the expensive one being offered when you are buying a single new appliance.

Why appliance insurance may not be worth it

  1. Manufacturer’s warranty – Before paying out for an expensive extended warranty look at other solutions. The manufacturer’s or retailer’s warranty is going to cover either the first year or two years of use. And, if you pay by credit card you are also covered. You can get your money back for goods valued between £100 and £30,000, if the goods are faulty, not fit for purpose or not as described.

  2. Home insurance – You can ask your home insurer what cover is already in place for appliances. You may be able to get a better deal through them.

  3. New technology – Bear in mind that electrical appliances are actually getting cheaper. Look at what flat screen TVs cost when they first came onto the market and what they cost now. In addition, electrical goods are now extremely reliable. You could also look at the fact that new technology moves on at a fast pace so you may not want your TV or laptop to last for more than a couple of years.

  4. Efficiency of home appliances – Home appliances are also getting more energy efficient. This is another reason why you may want to change your appliance after a few years. A new machine will cost less to run and will be more eco-friendly.


Conclusion

Warranties are legally binding contracts so it is important to think very carefully before signing up. Don’t feel a pressure with talk about special offers ‘only for today’ or other hard selling techniques.

Add up the amount of money that you are going to pay over the lifetime of the warranty. You may feel that the monthly amount is quite small. But, over a five-year period it can turn into a large sum of money.

After signing up, you have 45 days in which to change your mind and cancel the agreement. So, if you signed up for an extended warranty and subsequently feel that you were pressured into signing the contract, you still have a chance to get out of it. After 45 days you will still be entitled to a pro rata refund.

For some people an extended warranty will bring peace of mind but it comes at an expensive cost. Look at money advice websites before signing up to an insurance cover that you may never need.




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About The Author
Becky Hall
Becky never thought she would be a financial blogger. But Fate arranged that Becky had to put her accounting degree on the back burner right after she graduated with a first in Business and Accounting. While doing bookkeeping as a freelancer for private clients, Becky noticed how many cashflow problems can be solved with a little bit of education. Trying to keep her clients out of debt, Becky began writing resources which she distributed to clients. What began as writing advice for clients evolved into a passion and now Becky found her platform at Cashfloat. When she isn’t writing, calculating or budgeting, Becky can be found at her piano playing something classical.
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