Should you purchase an extended warranty?

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You’re buying a new computer. As you pay, the salesperson asks if you want an extended warranty. The cashier may call it a protection plan, insurance or a service agreement. You’re already making a large purchase. Should you pay even more for coverage you may never need?

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It all depends, says James Talaga, Ph.D., a professor of marketing at La Salle University. Look at several factors, he says, including your risk tolerance. Also consider if the product is new or likely to fail.

A traditional extended warranty extends the terms of a manufacturer warranty usually by one to two years, says Ty Shay, chief marketing officer at warranty company SquareTrade, and only protects you against the device failing for manufacturer reasons. It doesn’t necessarily cover wear and tear or accidental damage.

Accidental damage may be something you want included, though. “We have claims data from tens of thousands of devices, and most of the claims are from accidental damage,” says Shay. His company covers accidental damage under its extended warranties.

Before you make that big purchase, find out if you really need an extended warranty. While some companies give you 30 days to add it, most require that you purchase the extended warranty at the same time as the product.

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