Is an add-on protection policy ever worth buying?
The sales season is in full effect and the countdown to Christmas is well under way. This year, with the costof-living crisis, rampant inflation and concern over bills, all indications suggest people are being more cautious about what they spend.
But there is one area where we tend to be susceptible to impulse purchases. Regardless of whether you buy online or shop on the high street, chances are you’ll have been asked at the checkout if you want to take out a warranty or service contract to protect your goods or services if things go wrong.
We tend to err on the side of caution when it comes to these policies, despite the fact that we already have a number of consumer protection laws in place to cover you if something goes wrong with a purchase – and you may be covered for some damage to goods under your home insurance.
I’m not entirely convinced the bulk of these policies are much good, to be honest. I’ve also seen a number of contracts where it seems unlikely that you’ll be able to make a successful claim, once you dive deep in to the T&CS. Here’s everything you need to know.
Guarantees, warranties and service contracts
There are three main kinds of agreement you can purchase when you buy goods or services.
A warranty is a regulated insurance contract that you can purchase to cover anything from a fridge to car. They are agreements between you and an insurer where they will repair faulty goods or replace them within a set time frame. The insurance underwriter, not the trader or manufacturer, decides what to do with your claim.
A guarantee is usually included for free when you buy something and is a promise from the retailer or manufacturer that they will repair or replace the item or give you a refund if it becomes faulty, again within a set period of time.
A service contract is an agreement that looks very similar to a warranty but rather than being an insurance contract, it’s an agreement between you and the retailer or manufacturer. This is an important difference because you can’t go to the free Financial Ombudsman if there’s a dispute.
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 buy.
Your rights, if things go wrong
You have lots of statutory rights when things go wrong with purchases, though there are time limits. Here’s how they work.
14 days: If you bought goods or services online then you can return the item within 14 days even if there’s nothing wrong with it as long as you haven’t used it (there are some exceptions).
30 days: Under the Consumer Rights Act, you are entitled to a full refund if the goods or services you purchase are misrepresented, don’t work, or simply don’t turn up.
Six months: if the goods are faulty within six months, 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 repairing/replacing the goods before a refund applies.
Even after this period you should still be able to get a repair or replacement, though the onus switches to you to prove the item is faulty or didn’t last a reasonable amount of time.
Most guarantees will cover you for a period of one to three years. These guarantees relate almost exclusively to faults or damage though, and tend not to cover you for theft, accidental damage, and other things like pets with a grudge against your new sofa.
So if you have a guarantee already, there’s no point buying a warranty unless it offers you more protection. Either way, shop online to find a better (and cheaper) policy.