When you buy something new, the law requires it to be of satisfactory quality. The manufacturer (or the retailer) will usually guarantee the product for a period of time, generally a year. What an extended warranty does is cover you for any repair costs in respect of that product after the initial guarantee has expired.
You can also buy insurance cover for appliances that you already own but which are not currently insured, subject to their age and condition. With this type of cover there is usually a ‘no-claim’ period immediately following the start of the cover during which any claims for breakdown will not be met.
These policies cover repair costs following the breakdown of most household appliances, and most policies will also cover parts and labour. There is usually a maximum amount payable during the life of the policy and some may have a limit on each claim.
If the appliance cannot be repaired, ‘new for old’ policies will replace it with a new one of similar specification, or pay a cash equivalent if a similar model is no longer available. Other policies will make good up to the current value of the product after depreciation.
Some policies provide additional benefits, such as accidental damage or frozen food spoilage.
What may not be covered
Extended warranty policies usually exclude misuse, non-domestic use and cosmetic issues such as damaged paintwork.
Additional consumer protection
Since 2005 there has been additional consumer protection to combat the hard sell often associated with these warranties, whereby retailers often sold warranties whilst the consumer was in the shop buying the goods.
You can, if you wish, still buy cover from the retailer. Alternatively, you can buy it from specialist insurers, insurance brokers, banks or other financial institutions.
This type of cover is now sometimes included with packaged bank accounts. It is also possible to buy warranties that will cover a number of appliances, such as all of the electrical equipment in your kitchen.
Things to watch out for
Some warranties are not insurance contracts and are therefore not regulated or covered by compensation schemes. These types usually have names such as ‘service contracts’.
It is worth considering that some warranties may offer no more protection than your entitlements under normal consumer protection legislation and, in some cases, you may already be covered by a contents insurance policy and have no need for a warranty.
Also, consider how likely a product is to break down.