April 17, 2024

Extended Warranty: An Overview

An extended warranty, also known as extended protection plan, is a service contract that provides additional coverage beyond the period covered by the manufacturer’s warranty or the standard retailer’s warranty. Extended warranties are offered by the product manufacturers, retailers or by third-party insurers and warranty providers. In this article, we will look at various aspects of extended warranties including what they cover, benefits and drawbacks.

What is covered under an extended warranty?
Under an extended warranty, the product is covered against any defects or breakdowns due to normal usage during the period of extended warranty. The coverage depends on the terms and conditions specified by the warranty provider. In general, extended warranties provide coverage for repairs and replacement costs arising out of:

Mechanical & electrical breakdowns: Most common extended warranties cover repairs or replacements if any part fails due to a mechanical or electrical breakdown or defect. This is the core benefit of extended warranties.

Accidental damage from handling: Some comprehensive extended warranty plans also cover accidental damage like cracks, dents or liquid spills for premium products like laptops, smartphones etc. This provides extra protection beyond normal usage.

Theft & loss protection: A few extended warranties may provide coverage against theft or loss of the insured product for a small additional premium. This rider is useful for portable expensive devices.

On-site support: Many extended warranty providers offer on-site repairs by authorized technicians at customer’s premises without any additional labor charges. This saves the hassle of visiting service centers.

Benefits of buying an extended warranty
Peace of mind: An extended warranty offers long term protection against any unexpected expenditure on repairs outside the manufacturer’s warranty period. This provides financial security.

Save on repair costs: Repair or replacement costs out of pocket after the expiry of manufacturer’s warranty can be quite high. An extended warranty caps this liability within the policy amount.

Longer coverage duration: While manufacturer’s warranty typically lasts 1 year, extended warranties offer coverage spanning 2-5 years giving more years of protection.

Transferability: Most extended warranties allow transfer of remainder coverage to subsequent owners if the product is resold. This adds to the resale value.

Convenience of on-site repairs: As mentioned earlier, many provide on-site repairs at no extra cost saving visits to service centers.

Drawbacks of extended warranties
Additional cost: Extended warranties need to paid for upfront increasing the total cost of ownership of the product. The premium paid may not be justified if no repairs are needed during coverage.

Limited coverage: Extended warranties typically have several exclusions and may not cover certain problems like physical/liquid damages even if reported within the policy period. Terms need to be studied carefully.

Availability issues: Finding local authorized service centers during claim might be difficult for some obscure brands reducing the value of on-site support benefit.

Early cancellation: If the product is sold before the extended warranty expires, the remainder coverage amount cannot be refunded unlike the unused premium of an insurance policy.

Paperwork hassles: Claim settlement may require submitting documents like purchase receipt, warranty card etc. and coordinating with warranty providers for approvals adding to customer effort.

Factors to consider before buying
While extended warranties provide valuable protection against future repair expenses, they are not always worth the additional cost. Here are some factors to carefully consider before purchasing an extended warranty:

Reliability of device: Highly durable brands with less frequent repairs do not need extended warranties as manufacturer’s warranty will likely suffice. Unreliable models with short lives will benefit more.

Cost of repairs: If typical repair costs of the device are lower than the warranty premium amounts, extended warranty may not be a good buy.

Length of usage planned: Short-term users gain little as coverage period may exceed ownership duration. Long-term ownership benefits more from extended warranty.

Warranty exclusions: Check limitations, exceptions to determine if specific problems faced are covered or any known design issues exist before enrolling.

Claim settlement process: Assess ease of claims, approval percentage, repair turnaround times of the particular provider to avoid post-purchase hassles.

Discounts & promotions: Look for available rebates, bundle offers with the purchase which could make extended warranties more affordable.

Do-It-Yourself repairs: For tech-savvy users interested in self-repairs, extended warranties provide limited value unless repairs void product warranty.

To summarize, extended warranty provide multi-year protection against uncertainty of repair costs once the original manufacturer’s limited warranty expires. However, they are not always necessary depending on individual circumstances and needs. An informed decision weighing the pros and cons covered above is prudent before purchasing extended protection plans for products.


  1. Source: Coherent Market Insights, Public sources, Desk research
  2. We have leveraged AI tools to mine information and compile it