Is there such a thing as a "good and cheap" warranty?
November 1, 2012 10:13 PM   Subscribe

Thinking about buying a Nexus 4 from the Google Play Store. Are there good third-party accidental damage warranties out there that won't break the bank?

I'll probably be purchasing the 16GB Nexus 4 ($350 + tax) from the Google Play Store. No contract. I'll probably sign up with T-Mobile pre-paid (don't know if that's useful info or not).

I have absolutely no experience in buying a third-party warranty (like square trade on Amazon) -- especially something that covers accidental damage. I take pretty good care of my electronics and phones, but this is the first expensive smart phone I've bought off contract.

I'm also using AmEx to buy it, so I know there's an extra year of warranty, but I'd imagine it doesn't cover accidental damage and I've also never used it.

posted by apip to Technology (5 answers total) 2 users marked this as a favorite
I was well-satisfied with my warranty from SquareTrade on my last phone (also T-Mobile Pre-paid). They paid out about $100 less than the purchase price about a year from purchase. They might also be pricey - their prices tend to be on generic Android phones at some price.

Also keep in mind: T-Mobile will sell you accidental damage protection for $7 / month. No experience there.
posted by Apropos of Something at 10:56 PM on November 1, 2012 [2 favorites]

There are no good warranties on the market because the best warranty for small-value items like a cell-phone is self-insurance. If a warranty is worth buying (ie, the expected value of the warranty is more than the cost of the warranty), no one would sell it. The fact that you are being offered third-party warranties indicates the warranties are not worth the money you pay for them.

If you cannot afford to replace your Nexus 4 out of pocket, you cannot afford the Nexus 4 in general and you should not buy it. If you can afford to replace the Nexus 4 out of pocket, then you should not buy a third-party warranty, as it is a waste of money.
posted by saeculorum at 8:29 AM on November 2, 2012

to add to what saeculorum is saying -- replacing out of pocket doesn't mean you have cash to buy two or three nexus 4's hiding in your mattress. It means that any needs filled by the nexus 4 (phone contacts, texting contact, internet access) can be met by something you can pay for in cash.

also, saeculorum isn't quite right -- it makes sense to sell the warranties if all of the warranties together net them money. They don't have to profit on each individual warranty. So if 4 people buy the warranty , and you're the one that keeps getting into accidents, the company can still profit while the other 3 don't. That's how insurance works.
posted by garlic at 8:37 AM on November 2, 2012

They don't have to profit on each individual warranty.

That's correct - that's why I said the "expected value" of the warranty, not the "actual value". For instance, in your example of selling a warranty to four people for a, say, $1000 item, and only only one loss is expected, then the expected value of the warranty is $250. However, the warranty provider has to sell it for more than $250 both to ensure they make profit and to hedge against higher-than-expected losses. So, you would have a case where you pay, say, $300 for the warranty, but only expect to receive $250 from the exchange. Now, you may actually end up receiving less than that (in the case of no loss) or more than that (in the case of a loss), but that doesn't change the expected value of the warranty.

Warranties/insurance only make sense for things you can't afford to replace out of pocket - for instance cars, houses, and lives. If you can afford to replace something out of pocket, then you are paying the warranty provider money to give you back less money, when you already have that money available to you.

The fact that some people get more money from their warranty than they pay for it in no way means the warranty was worth buying.
posted by saeculorum at 8:45 AM on November 2, 2012 [1 favorite]

I've always gotten SquareTrade warranties for my expensive electronics (phones, tablets, laptops). They tend to cost about the same as the manufacturers' warranties, but offer better coverage. In particular, you can get warranties that cover accidental damage and water damage; most others seem not to. Redemption's been totally painless -- for example, when I ran over my iPhone with a lawn mower (don't ask) SquareTrade just had me email them some pictures, then sent me to the Apple store to buy a full-priced replacement which they reimbursed me for about a day later.

I'm aware of the fact that warranties in general are a bad deal, and obviously the averages bear that out. However, I'm particularly hard on my electronics -- the mower thing's an outlier, but by no means particularly surprising -- so for me the math shows I've come out ahead. In your case, it is probably worth thinking a bit about whether you'll make or lose money on them, keeping in mind most people lose.
posted by jacobian at 11:40 AM on November 2, 2012

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