Before Buying Product Insurance

Things to think about when you're offered an extended service warranty . . .

* What is the cost of a typical repair? Numerous independent studies of repair rates and costs demonstrate that the probability that a repair will set a consumer back more than the cost of an extended warranty is close to nil.

* Even if you want an extended warranty, don't say yes right away. Increasingly, most retailers will give you at least a few days to decide if you want to buy an extended warranty, giving you time to find out things like repair costs and reliability ratings. Also, many manufacturers will sell extended warranties directly, usually for less than the retailer.

* Check your credit card . Many Visa, MasterCard and American Express cards offer automatic one-year extensions to manufacturer warranties.

* What coverage does the manufacturer offer automatically ? While many manufacturers have been cutting back on warranty lengths -- five years used to be the norm, now one-year warranties are standard -- a major problem from product defect will in almost all cases emerge within the first year. And long-term warranties are still out there. Don't buy an extended service contract on a product that has a three-year manufacturer's warranty.

* Bargain . Ask for a lower price. It never hurts to ask.

* How much does it cost ? Anything that is more than 20 percent of the purchase price should be automatically suspect.

* Don't double insure . Does the extended warranty go into effect right away? If so, chances are you're overinsuring because of the manufacturer's warranty. If you buy a three-year extended warranty on a refrigerator with a one-year manufacturer's warranty, chances are you're paying for three years but only getting two.

* Find out the financial stability of the underwriter of the warranty . Extended warranties are insurance products. Insurance companies fail. In 2003, the National Warranty Insurance Co. went bankrupt, and several thousand car owners had contracts bought-and-paid for that were worthless.

* Who will be providing the service ? When your refrigerator breaks, the warranty provider decides who repairs it, not you. Will you get repair technicians certified by the manufacturer?

* Does the extended service warranty come with product support ? When something stops working, do you have to go through an entire claims process or can you call someone knowledgeable about the product who can see if it's a simple fix you can do yourself?

* Rely on the reputation of the retailer . If you're unhappy with your warranty provider's service, complain to the store that sold it to you. Reputable retailers don't want grumpy customers, and if you have a legitimate beef with something they sold you, even if it's an extended service warranty, they should give you some satisfaction.

* Read the exceptions . Will you replace this thing if I drop it or spill coffee on it?