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Benefits of service contracts far outweigh their costs

By: Tim Meenan, Service Contract Industry Council Executive Director and General Counsel

Think about a typical morning routine: You wake up in a comfortably cool home, thanks to your air conditioning system. Next, you probably check your smart phone for the latest news and email, then unload the dishwasher and cook breakfast for the kids before hopping in your car to take them to school.

Now fast forward one week: Your bedroom is an unpleasant 85 degrees thanks to a broken air conditioner; your cell phone screen is a spider web of cracks because you dropped it; the dishwasher decided to leak water all over your kitchen floor; and to top it all off, the stove won’t turn on and your car is dead in the driveway.

This horrid morning may be an extreme example, but consider just one of these scenarios in isolation. Any one of these could quickly cost you hundreds of dollars in repairs, not to mention hours of your time finding someone to do the job. And once the damaged item was repaired, would you be confident the job was done properly?

You could have saved all this time and hassle by purchasing a service contract (commonly known as an extended warranty) to protect your electronics and appliances. Contrary to some recent reports claiming that extended warranties on appliances and cars are a waste your money, the benefits of these contract can far outweigh the cost of purchasing the coverage.

Consider that a typical appliance repair can cost $250 but the extended warranty costs only half that, and can make more than one repair during the term of the contract. The manufacturer’s warranty may help in some situations, usually only for the first year or less, so an extended warranty is well worth a second look.

Many manufacturer warranties expire after 90 days. If you think your purchase will outlive the manufacturer’s warranty – as most electronics and appliances do – wouldn’t you rather have coverage that protects you for years beyond that limited period? Would you be able to foot the bill for repairs or replacement on day 91?

Most consumers now own a cell phone, so consider a few facts about damage to these essential tools:

  • Consumers spend a shocking $3 billion a year repairing electronics destroyed by their pets
  • 17 percent of iPhone users have damaged their phones more than once, costing $5.9 billion a year in repairs
  • A simple coffee spill onto a smart phone can cost more than $800 for a replacement, without an extended warranty


With a service contract, you know you’ll be able to get repairs or replacement when you need it. Service contracts covered more than 95 percent of claims in 2012 – sometimes resulting from drops or breakdowns but sometimes caused by routine wear and tear. This is especially important in light of how much use we get from our electronics and other items in a year.

Statistics from various sources show us that each year, the average American family washes 110 loads of dishes and 300 loads of laundry, flushes the toilet 2,000 times and drives 14,000 miles. That means a lot of wear and tear way beyond the 90 days of many manufacturers’ warranties.

Most service contracts provide 24-hour claims service to their customers, with expedited options for emergency situations. And emergencies arise more often than you might think. The typical American family looks to its home service contract twice a year to replace or repair appliances. Better still, most appliance repairs can be done right in the home, making the emergency less disruptive. The service contract can even be transferred when ownership of a covered item changes.

When you consider all these factors, it’s clear that service contracts provide a practical solution for consumers purchasing expensive items for home or personal use – everything from cell phones, dishwashers and televisions to laptops, refrigerators and air conditioning units. The peace of mind of knowing you’re covered in any instance, combined with the benefits when repairs are necessary, makes a service contract the smart way to go.

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