Protection plan

[manning]

I plan to buy a scanner for $170.00.

A friend says I should buy the 2yr protection lan for $32.00. I think I don't need it. Who's right?

 

[MarkBarbieri]

A protection plan is like insurance. Insurance companies make money by charging more in premiums than they pay out in claims. It's sort of like gambling in Vegas...in the big picture, the house wins.

So why do people buy protection plans or insurance? I can think of two good reasons. First, people buy them because the cost of dealing with a loss is so financially burdensome that it is safer to offset the risk with insurance. You know full well that the insurance company is charging you more than you are likely to get paid in claims on your house, but you insure it anyway because having to eat the cost of a burned down house would be much more financially disruptive than paying a monthly insurance premium. If your $170 scanner broke, would that put you in a serious bind? If so, buy the protection.

The other reason for buying a protection plan is because you have an information advantage over the insurance company. They do the best they can to assess risk and to charge people that are high risks higher premiums. If you think that you are at a significantly higher risk to have your scanner fail than is normal, the protection plan makes sense. Perhaps you work in a harsh environment or your electricity is really, really flaky.

If neither of those conditions is met, I think you are better off saving your money rather than betting $32 that your scanner will fail outside of the warranty period but during the extended warranty period. It's a bet that is extremely heavily in favor of the protection company. That's why they market protection plans so aggressively.

 

[WDWFigment]

Always self-insure as much as you can feasibly afford.

My guess would be that $170 won't be a big hit; I personally wouldn't insure it.

 

[photo_chick]

There is no right or wrong here. It's whatever you're comfortable with.

Personally I wouldn't for a scanner. They usually have good factory warranties (one of mine has a 3 year warranty) and it's not like I'm going to be taking it out on a boat or in the rain. It will be relatively safe on my desk, barring the occasional lighting strike or cat induced mayhem.

 

[ChiSoxKeith]

Agreed with the previous posters. You have to figure out what level of risk you are willing to tolerate.

 

[GrillMouster]

$170 is too low of a expense to pay for an extended warranty. On bigger-ticket purchases ($1,000+) I'd only consider an extended warranty if its price were 10% or lower than the cost of the item it covers. In the case of your scanner, the warranty is a whopping 19%! Not worth it.

 

[Golf4food]

Statistically you are correct. Most electronics warranties go unused and are therefore a financial waste to the majority of people suckerd, I mean, who choose to purchase one from the pimpley kid behind the counter, I mean sales professional, at Best Buy...