Safeguarding goods can be a confusing experience
If you’ve bought anything with a significant value recently, from a fridge to a phone, then chances are you’ll have been asked at the checkout if you want to take out a warranty or service contract.
But are they any good? In simple terms, these contracts have a bad reputation. Often overpriced, offering services that you may be covered for already through manufacturer’s guarantees or other insurance policies and containing tons 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.
GUARANTEES, WARRANTIES AND SERVICE CONTRACTS
There are three main kinds of agreement you can get when you buy goods.
A warranty is a regulated insurance contract you take out so an item is insured and gets repaired or replaced if it breaks or is damaged. They’re often called ‘extended warranties’ too. The insurance underwriter, not the trader or manufacturer, decides what to do with your claim.
A guarantee is usually included when you buy something and is a promise from the manufacturer or trader that they will repair or replace the item or give a refund if it becomes faulty within a set period of time. Often called ‘manufacturer’s guarantees.
A service contract is an agreement between you and the trader or manufacturer that looks like an insurance contract but isn’t. They usually work in the same way though, but your rights are different if there’s a dispute.
It is confusing and not always easy to tell what agreement you have without looking at the small print but make sure you ask when you make the purchase.
Here’s why it matters.
YOUR RIGHTS, IF THINGS GO WRONG
You have lots of statutory rights when things go wrong with goods or services, though there are time limits. Here’s how they work.
14 days: if you bought goods or services online you can return the item within 14 days even if there’s nothing wrong with it.
30 days: The Consumer Rights Act says you are entitled to a full refund if the goods or services don’t work, aren’t as advertised (misrepresented) or aren’t provided.
Six months: if the goods are faulty within a six-month period you can still return them, but it’s up to the seller (not the manufacturer) to prove that they weren’t faulty when you bought them. You have to give them one chance at repair/ replacing the goods before a refund applies though.
Up to three years: Most guarantees cover you for a period of around 1-3 years. This relates almost exclusively to faults or damage though and won’t cover you for theft, accidental damage, pets that like to destroy sofas or other things.
So a guarantee is useful 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.
If you make a warranty claim, the underwriter of the insurance policy will assess what’s happened and if it’s covered, they’ll pay out to repair or replace the item.
Bear in mind that you’ll only get what you paid for, so if your warranty covers your iPhone 8 (other brand phones are available) then you won’t get a lovely new iPhone 12 – you only get the cash to replace what is damaged or lost.
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.