Insurance endurance

July 31st, 2008

I was reading a discussion about whether or not it was worth buying AppleCare – Apple’s extended warranty – on your new iPod/laptop/desktop. It reminded me of another discussion, several years ago, when a friend pointed out to me that all insurance policies of any sort will, statistically, lose you money. If they were worthwhile for the purchaser, they wouldn’t be worthwhile for the manufacturer/insurer, and they exist only because they make money. Money for other people. People who aren’t you.

Now, it’s not always easy to keep that fact in mind when you suddenly get a £700 bill for a new logic board on the laptop you bought 18 months ago. You forget that you saved £120 by not buying the extended warranty on the elderly fridge which is still working fine, and the TV, and more on the last laptop, and your last three mobiles… and so forth, all of which add up to much more than the immediate bill that looks so distressing.

So you should only buy insurance when the thing you’re guarding against is so expensive that you really couldn’t afford to be hit by it (which must also mean that it’s terribly unlikely, or you couldn’t afford the premium), when you’re legally obliged to, or when you have good reason to believe that it’s very much more likely to happen to you than to anybody else. For anything else, if you feel pangs of angst when the salesman starts putting pressure on you to buy his lucrative extended warranty, set up a special savings account and put the money there instead. If you can keep your head when all about you are losing theirs, you’ll be better off in the end, my friend!

Posted on Thursday, July 31st, 2008 at 9:53 pm and filed under General.

5 Responses to “Insurance endurance”

  1. Claes-Fredrik Mannby Says:

    Can I sell you some insurance against suits for bad advice? ;-)

  2. Jason Young Says:

    I completely agree. Besides, any insurance or warranty on products I buy will have been made void within a couple of days after purchase because, naturally as an Engineer, I will have taken it apart to see how it works.

  3. Pete Says:

    I’ve always thought of insurance companies as glamorised bookmakers.. by taking out home insurance you’re just betting that your house will burn down.

  4. Mathew Says:

    In principle i agree with you, and so i hardly ever buy the product insurance. But i advise *everyone* to buy it for their apple computer, especially laptops. There are a few reasons for this:

    * Apple charges extreme prices to open up your computer. The insurance might make them money, but repairs, i think, make them more.
    * Apple pushes new technology to such an extent, that they introduce a line of lemons a little more regularly than they like to publicly admit.

    I’ve purchased apple care for my last three laptops and each time its paid for itself and then some. My current (first generation) macbook has had the screen replaced, the logic board replaced, and the palm rest replaced (which would have been free anyway). It needs the palm rest replaced again, and the screen is flickering still. So apple is going to have to replace a few more things soon. I would have been in the cost of the computer and then some at this point if had not purchased the care.

    My advice: don’t buy the insurance on the fridge, the headphones, the TV, the speakers, etc. But buy it for your Apple Laptop.

  5. qsf Says:

    Mathew – you make a good point.

    If somebody’s insuring you against costs you might get from a third party, you’re probably better off just paying the third party.

    If, on the other hand, they’re insuring you against what you might have to pay them in future, they’ll be basing it more on their own internal costs and may simply be doing it for cashflow reasons, so it may be much less clear-cut there.

    And I do agree about Apple reliability – it ain’t what it used to be, especially on new, cutting-edge designs.

    So AppleCare probably is more easily justified. I’ve used it in the past and actually have it on my current laptop.

    Mind you, I badly want to upgrade my hard disk, and doing so, even through an Apple dealer, would invalidate my AppleCare. So it has other downsides too!

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