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Warranty vs. insurance: What’s the difference?

So you just bought the latest [insert fancy electronic name here], and you know that it comes with a warranty. But you’ve also heard it’s smart to get an insurance plan to cover all your devices. Aren’t they the same?

The short answer is no. Insurance may cover things that a warranty won’t. Let’s break down insurance and warranties to get a better idea of both — and which may be the best option for you.

What’s the difference between a warranty and insurance?

Warranties generally come with your purchase.

With most major purchases, like home appliances and expensive electronic devices, your new purchase may come with a warranty. Sometimes called a service warranty, this policy protects your investment if your washer/dryer, dishwasher, oven, fridge, etc. stops working before you would expect it to wear out. A new smartphone or smartwatch purchase usually also comes with a warranty too — in case your phone or watch has a glitch that causes it to malfunction for seemingly no reason.

A warranty is usually “free” — or covered in the new price of your item. Sometimes, warranties aren’t covered in the cost, but offered when you purchase it to protect your valuable for a specific period of time, and designed to give you some peace of mind in case something happens to your cell phone, washer and dryer, or other major purchase.

Say you have a one-year warranty on your oven and it suddenly stops working at the nine-month mark. With a warranty, you can call your manufacturer and, depending on the terms, your item will be repaired or, in some cases, replaced at no additional charge to you.

Insurance can be added on to further protect your device.

Insurance is usually supplemental and something you purchase to add to your level of protection or provide protection if you made your purchase without a warranty or with a limited warranty.

Both are ways to protect your valuables. Both options are great if you want the peace of mind of additional protection. Depending on the kind of protection you want for your valuable, a warranty or insurance (or both) may be right for you. The level of protection will also depend on the kind of asset you want to protect.

In general, warranties cover device malfunction, or incidents in which the device “does not fulfill its intended purpose,” but does not cover damage caused by an accident, theft or less, mishandling — something caused by a person, intentionally or otherwise.

So if your phone stops working because it was made improperly (and not because you dropped it in water or it was stolen), your best bet is a warranty. If you want to protect your stuff against life stuff (submerged in water, the dog ate it, or your toddler put it in the washing machine), it’s a good idea to add some insurance coverage.

When is it a good idea to buy additional protection for my major purchases?

In short, warranties do not cover as many things as insurance because they only protect against manufacturer defects, not things that could happen to your appliance or electronic in the normal course of its life span.

If you want an extra layer of financial protection for your valuables and don’t want the worry of having to buy a brand-new one before you’re ready, it’s a good idea to add some insurance. There are many options available, and it’s a good idea to shop around.

With your phone plan, you probably know when you’re upgrade-ready, but what if the unexpected happens? Or what about those necessary appliances like refrigerators and ovens — which can cost well over $1,000 to replace? These reality jolts are some of the most expensive household items you’ll ever buy, and oftentimes, happen when you least expect it.

Repairing or replacing a big appliance can be a major hit to your budget, especially when you’re not prepared for it. Experts agree that you should save 1-2% of your home’s total value every month for emergency repairs. Those experts also agree that few people actually do it.

And because of the staggering cost of new smartphones, an unexpected disaster that befalls your smartphone can feel catastrophic — just like a household appliance. Given the fact that we know how expensive smartphones and major appliances are, and knowing most people don’t budget for a major expense of repairing or replacing either, what can you do to protect your budget when it comes to large, unexpected purchases?

Additional protection is a good option — but do your research.

Rather than paying to repair or replace new appliances or buy a new smartphone before your plan is upgrade-ready, it may be a good financial decision to look into supplemental insurance you can count on if you need to replace an expensive appliance for a reason not covered by your homeowners or renter’s insurance — because there are some things that are simply not covered in these plans. (Think: natural disaster damage, avoidable accidents, and cosmetic damage).

This supplemental insurance is typically referred to as personal property coverage, and it covers the stuff you value most. It's usually low-cost and can kick in during situations in which your homeowners or renter’s insurance does not apply.

A good option is one like Kasasa Care™ because it covers many of your expensive personal items (from electronic devices like laptops to your refrigerator or patio furniture) at an affordable monthly payment, with no contract and ample flexibility. You can choose to get coverage for almost anything you own — no matter the make or model, or if it’s new or used. (Bonus: you can even bundle your items to save!)

It is possible to cover your major appliances and expensive electronics both in and out of their original warranties. Shop around, ask questions, and do your research to determine which type of coverage will work the best for your needs. And save you the most should the unexpected happen.

Tags: Protection, Care, Asset

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