Warranties are one of the biggest cash cows for the insurance services industry. Why? Well loads of us have at least one, most of us instantly forget about them (or lose the documents) and the proportion of people who actually claim on them is so low that they generate huge profits for insurance brokers and underwriters.
But are they any good? In simple terms, warranties have a bad reputation – and many of the ones I’ve seen deserve it. Often overpriced, offering services that you’re covered for already through manufacturer’s guarantees or other insurance policies and containing tonnes of baffling or plain unfair terms and conditions that can mean making a claim is a nightmare. Of course, not all warranties are bad, but some aren’t worth the paper they’re written on. Here’s a quick guide.
Some warranties aren’t worth the paper they’re written on
So what is a warranty? Well, there are three main kinds of agreement you can get when you buy goods, to give you a bit of reassurance if they pack in or get damaged.
Sounds confusing? That’s because it is! It’s not always easy to tell what agreement you have without looking at the small print on the bottom of the agreement, so make sure you ask when you make the purchase. Here’s why it matters:
I was speaking to a Resolver user the other day who was telling me about how her kids had been arguing over a tablet computer. After a stern warning, they stopped – and started to yank it off each other instead. Only for the tablet to slip out of their hands, fly through the air (in slow motion, is how she described it) and land in the full washing up bowl. Those little bubbles of doom appeared. RIP tablet. And so she went to make a claim.
The tablet came with a manufacturer’s guarantee, but it only lasted for one year and had expired, so she couldn’t go to the retailer or tablet maker. She did have a warranty though and put in a claim. The underwriter turned down the claim because they said she had been ‘negligent’ (some insurer’s love that word – I hate it). Then turned it down again because water damage wasn’t covered.
I had a look at the warranty and it was pretty rubbish. But their terms didn’t make it clear what ‘negligent’ was defined as, which meant they couldn’t rely on it. And the wording around water damage was so broad and ambiguous that I thought if the case went to the ombudsman or the courts, they’d have lost. They backed down and peace was restored to the household with a new tablet, and stern warnings to squabbling children.
You have lots of statutory rights when things go wrong with goods or services you purchase. We cover these in detail on our website (and MoneySavingExpert break down the legal stuff here) Here’s how it works.
So far, so good. And all without the need to turn to the guarantee, insurance or service contract. Of course, this being the law, expect exceptions to the rule and complications (the rules for digital content and things bought online are a little different).
So a guarantee is a useful thing to have, if you accept that it’s not going to cover everything. If the goods come with a guarantee, you might want to add them to your home insurance for additional cover, or wait till the guarantee is due to run out and add them later to save a bit of cash (the tablet scenario I described wouldn’t have worked with just a guarantee though).
Now many warranties are a bit rubbish, but that doesn’t mean you’ve lost out. Just because the contract might be filled with vague terms and bonkers exclusions doesn’t mean it’s fair. And if it’s not fair, you can take things further.
Resolver can help you make your complaint to the shop, manufacturer and insurance company, so use our simple complaint tool to get started. But what if you’re not happy with the businesses response?
There are two ombudsmen schemes that you can take your complaint to (and we’ll help you do it – it’s dead easy). Both schemes are free but they do have different powers.
The retailer, manufacturer or insurer has up to a maximum of eight weeks to resolve your complaint. If it gives you a decision and you’re not happy – or if it doesn’t respond in time – you can take things further.
If you’re making a significant purchase, it really does make sense to think about getting a guarantee or insurance if you can’t afford to lose or replace it. But don’t feel pressured into taking out a contract at the till or on a whim. Take some time to think about it and look at all the options. And if something goes wrong, we’re here to help.