Extended Warranties for Your Gadgets: Are They Worth the Money?

Holiday shopping season is in full swing, and smartphones, tablets, and other electronic devices once again top many shoppers' gift lists. Given how expensive many popular gadgets have become, one big question many shoppers are facing is whether or not to tack on an extended warranty to protect themselves should their electronic devices come to harm.

They're Lining Up to Sell You Protection

Retailers know that the best time to get you to pay to protect expensive items is while you are making a big-ticket purchase. For years, Best Buy (BBY), Sears (SHLD), Walmart (WMT), and other major retailers have sold extended warranty protection on high-priced electronics like computers and TVs. That coverage can be pricey, with Walmart having recently charged $65 for a two-year TV service plan and Best Buy offering two-year coverage on an $800 TV for $99.99 and five-year coverage for $179.99 . Appliance warranties can also be expensive, with Sears recently charging $280 for a three-year protection plan on a $950 refrigerator.

Protection plans for smartphones and tablets are also popular. (AAPL) offers its AppleCare for its devices. Coverage to extend an iPhone's warranty and other protections for two years will run you $99. Other companies have sought to offer more comprehensive coverage for electronic devices, with Protect Your Bubble offering phone and tablet insurance for $7.99 to $9.99 a month that covers not only mechanical problems but also common mishaps like damage from drops and liquid spills, as well as theft or loss.

Many Items Have Built-In Protection

What many consumers don't realize is how much protection against common problems they already have, even without buying extra. Nearly every purchase comes with at least limited warranty protection for mechanical defects. According to Consumer Reports, most issues that would qualify for coverage under extended warranties tend to happen during the initial warranty period, making the extended coverage essentially worthless.

Moreover, many customers who use credit cards to purchase items get the benefit of extended coverage from the companies behind their plastic. For instance, MasterCard (MA) automatically doubles whatever manufacturer warranty a product offers, and provides 90-day insurance coverage even against theft or accidental damage on many purchases. Visa (V) offers similar coverage on certain types of cards it offers.

On the other hand, even high-priced protection won't cover every loss. Some liquid-damage coverage won't cover you if you drop your in a swimming pool, for instance. Moreover, with certain policies, if a loss happens right after you sign up for coverage, you'll find that the protection doesn't begin until after an initial period.

The other key thing to consider with gadget insurance is the fact that if a loss occurs, you might end up having to foot a big part of the bill.

Read more: Extended Warranties for Your Gadgets: Are They Worth the Money?

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