Deciding whether or not I should recommend purchasing an extended warranty on a new tech toy is something I've struggled with in the past. I've never payed for one myself, but my reason for doing so is less of a concrete logical reason, and more of a vague belief that I'll be able to handle whatever disaster comes my way for the best price possible.
In his book, “The 1-2-3 Money Plan,” Gregory Karp transforms my cloudy thoughts on this subject into a clear road to reason. “Keep things simple and don’t outsmart yourself. There’s a lot of junk insurance out there that is way too expensive for the risk it covers. Does anybody really think a $40 extended warranty on a $200 camera is a good deal?”
“but it paid off for Bob when his camera broke!” - Sure, there are many examples of the extra protection paying off. There are also plenty of examples of people winning the lottery, or hitting it big in Vegas. These examples are just not as common as you would think, and there are far better ways to spend your hard earned money.
“what should I do instead?” - Self insure! Take that money you would have spent on the extended warranty, and put it away in a savings account. You'll find this savings account quickly outgrowing the cost of any repairs you might need in the long run, and soon able to pay for a complete replacement item.
“don't forget common sense” - This is less of a hard and fast rule, and more of a rule of thumb. It's a good starting point if you're unsure, and works for most products, but don't blindly follow this advice. Make sure you do your research, take care of your new products, and don't forget to use common sense!
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