Domestic appliance insurance can work out to be much better value than paying for extended warranty cover at the point of sale when you have just bought a new piece of household equipment.
However, before you decide to take out domestic appliance insurance you need to do your research. Like any other type of insurance the cost and scope of the cover varies with different providers.
What is domestic appliance insurance?
Domestic appliance insurance is insurance cover to replace equipment that goes wrong. It is worth considering this type of insurance if you have expensive equipment such as a cooker, dishwasher, washing machine, expensive TV or other type of high-value electrical equipment.
Remember that most of these goods that you purchase will come with a one year guarantee automatically, so if you are going to purchase this type of insurance it makes sense to do so once the standard guarantee ends.
Why extended warranties are a rip-off
Extended warranties purchased in a shop at the time of sale are almost always a complete rip-off. Many warranties sold in this way cost almost as much as the product themselves and you are better off taking the risk and just buying a new product if it goes wrong.
There are a few exceptions. I recently bought a new LCD TV from Richer Sounds and their extended warranties have an excellent reputation because the cost for five years extra cover on most products is set at ten per cent of the purchase cost. If you are offered extended cover at this price on a product you know you will use a lot it could be worth considering the extended warranty rather than purchasing domestic appliance insurance once the original guarantee runs out.
However, in most instances buying appliance insurance from a separate provider will work out to be better value. The price you pay for an extended guarantee has been carefully worked out to ensure that both the retailer and the insurance company make a tidy profit. A report by Consumer Reports from 2003 found that the profit margin is often as high as 70 per cent but that less than ten per cent of products required repairs in the first three years.