Would you buy an ESP – extended service plan?

By | May 19, 2010

If you’ve ever bought anything expensive, you’ll likely have been asked if you want some kind of extended service plan for that item.

For the most part, the stores have a good reason to sell the plan: it’s mostly additional profit for them, since the phone is already under warranty for the first year anyway. Additional warranties may cover devices for an extended period upto five years.

But for many companies, the profit margin from the warranties really add to the bottom line, because they are earning a commission (40 to 80%) on the insurance policy (that’s what it is, in effect) upfront that could equal the entire profit of the product sold, and then some. The money is upfront.

And the insurance is handed off to some other company. Seriously, I can’t think of a larger waste of money than to buy insurance for a phone or camera that may not even be used for more than 12-18 months!

But for some items, it may be worth it if you are using an expensive product that is difficult to repair or replace. However, do your research properly, and check out what you’re covered for: terms like ‘accidental damage’ may not mean exactly what you think it should.

I mean: I didn’t deliberately spill that cup of coffee on my new Asus Eee PC… it just toppled over! However, you also will find positive stories that attest to extended service plans. Do your own research!