Get the facts on extended warranties before heading to the electronics store.

Illustration of various unlikely emergency events occuring to electronics

As if buying a big-ticket electronics item or an appliance weren’t confusing enough, customers are frequently offered extra warranty protection for an additional fee. That can sound appealing: Who wants to pony up cash for a repair? You may also be told that the warranty is an insurance policy administered by the store itself or by a third-party insurance company (like Chartis, AmTrust, or CNA). What may be less clear is exactly what is covered. “The costs and terms of these contracts vary greatly,” says Eric Arnum, the editor of Warranty Week, an industry newsletter. “Protection can last anywhere from one to five years, accidental damage may or may not be covered, and there isn’t one gold standard of coverage to look for.” So is an extended warranty worthwhile?

The pros: If you get stuck with a lemon and were lucky enough to have bought a solid policy, you could save a little money.

The cons: First off, you’ll probably never need the protection. “It’s unlikely that appliances and electronics will break during the coverage period, and when they do, the cost of the repair is often comparable to the cost of the policy,” says Mark Kotkin, the director of the Consumer Reports National Research Center. And because most of the contracts are written in complex legalese, you may think something is covered when it isn’t. Figuring out how to file a claim can be trickier still.

The bottom line: Skip the extended warranty. Instead, take the money that you would spend on one and deposit it into an interest-earning bank account. Then, if something does go wrong, you’ll have the money to pay for the repair.