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Jack Falvey's Investor Education Briefs: Buying warranties is fridge insurance


When will your fridge die? The actuarial life of an appliance is unknown to all but the keepers of manufacturers’ warranty records. You can rest assured that a profit margin is built in to all add-on product warranty sales.

Should you self-insure? Should you underwrite your own risk? What are the costs, and what is the risk and exposure?

Smart phone screen replacement coverage is a must for teens. Not so much for others. Power train protection on cars and service policies on computers are part of our technology culture.

After the obvious choices, things become subjective. Low risk, low cost, indicates self-insurance. Few will take the time to add up their total insurance costs, but if you do, the numbers will not be a small part of your income. Adding to that number little by little should be avoided.

Product insurance costs are classic nickel-and-dime expenditures. They tend to add up if not identified and controlled.

Before you insure the life of each and every appliance in your world, take a step back and make some rules for yourself.

Manufacturing standards are not quite back to the planned obsolesce era, but the design life of things does seem to be lessening rather than lengthening. Refrigerators no longer last forever!

We each have to deal with replacement costs of things, with or without insurance. This is an area of financial planning that is far more subjective than we might like.

Watching over the little things has always been a good strategy. Add self-insurance risks and rewards to your lists of things to keep track of. Risk management at the individual level should be within your skill set.

Jack Falvey is a frequent contributor to the Union Leader, Barron’s and The Wall Street Journal. He can be contacted at Jack@Falvey.org.


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