You can expect that the sales pitch at your local consumer electronics store is going to include an offer to sell you an extended warranty. Be it a smartphone, tablet, digital camera or game console, you’ll hear it. But some extended warranties offer less than meets the eye.
At Macworld 2013, which recently concluded in San Francisco, the booth for Worth Ave. Group drew passersby with an offer to let them smash an iPad screen with a hammer. It was all done to draw attention to Worth Ave.’s insurance policy for iPads. The company offers insurance, for around $3-$4 a month, to repair or replace your iPad or other device if it’s ever lost, stolen or damaged. (Though, of course, not purposely damaged by its owner with a hammer.)
“When people get asked if they want the warranty and they purchase it, they’re thinking that they are getting coverage for something that they’re really most of the time not getting,” said Gretchen Cathey, operations manager at Worth Ave., as we chatted on the exhibit floor at the Moscone Center.
I found this out the hard way when I left my week old Apple iPhone 4S behind in a cab in San Francisco last year. The AppleCare warranty, I discovered, did not cover the device being lost or stolen. Fortunately, the insurance I got through my carrier, AT&T, did cover a lost phone and I eventually got a new iPhone.
However, it was not an entirely painless experience. Under the AT&T plan, which costs $8 a month, the deductible was the subsidized price of the phone, $199. The clerk at the AT&T store told me that without the insurance, the replacement cost of the phone would have been the unsubsidized price of $649. Gulp. You may find similar terms with coverage offered through other U.S. carriers.
Worth Ave.’s Cathey, however, said their premiums are usually only $3-$4 a month, versus $7-$8 a month through carriers -- and the deductible for an iPhone, or other smartphone, is only $50. For a laptop it’s up to $100. And as with other insurance products, you can bundle policies to get a discount. Just like you get a discount if you get your car and homeowners insurance from the same company, you can bundle coverage for your smartphone, laptop and game console and pay less.
Worth Ave. started in 1971 as a property-casualty insurer focused on protecting the property that college students kept in their dorms such as clothes, furniture, appliances, bikes or TVs. Then, as students accumulated more electronics, coverage expanded to computers, laptops, tablets, game consoles and smartphones, Cathey said. Coverage also now extends to the general population, not just to college students. And more recently, as people carry multiple portable devices – laptops, tablets and smartphones – their exposure to risk increases, she said.
“What does the average person have in their bag when they are on their way to work?” Cathey asked. “They have got their iPad, their work laptop, their cell phone. You could easily have $6,000 in your bag and you want to insure all of those devices, not just one, because they are all equally important to us.”
At Macworld, Cathey set a number of already non-functioning iPads and iPhones on a counter and several attendees stopped by to give them a whack with a hammer.
“We like to break things just to show just how easy it is,” she said.
This is something I also learned from personal experience. I had an iPad 2 for only about a month last year when I picked it up from the kitchen table one day and discovered a crack on the screen. A quote for replacement of it was $150. Luckily, the crack was on the edge of the screen, not the actual viewing area, and is hasn’t spread – like a crack on a car windshield – though Cathey told me sometimes they do spread.
And as the installed base of devices continues to grow, so does the risk to owners of a loss. According to IDC, the global tablet market alone grew by 75.3 percent in the fourth quarter of 2012, from the same period of 2011. Meanwhile, the global smartphone market grew by 36.4 percent in the fourth quarter over the year ago quarter, said IDC.
Many device warranties cover defects in material or workmanship but not theft, loss or damage. The Worth Ave. policy covers damage such as a cracked screen, liquid spills, damage from being dropped, theft, fire, flood, natural disaster or a power surge, Cathey said. And if you have a PC and get a virus, the policy covers replacement or repair because the insurance company considers that vandalism.
Cathey said she believes Worth Ave. is the only insurance company that offers this breadth of coverage for electronics, but it still would be worth doing an online search for alternatives and looking into the coverage your carrier offers. But read the fine print.
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