Appliance Insurance

Or Putting Money Aside - Which is Better?

Appliance insurance - the question is do you need it or not? We have probably all been there - a mayor appliance breaks down and we wish there was a way we would not need to pay the several hundred (or in some cases even several thousand) dollars for the new appliance or repair of the old one.

Well, there is a way - Appliance insurance or in our case - Refrigerator insurance, of course. But such insurance might cost quite a lot and you might have a lot of trouble when trying to get the insurance company to pay.

You will need to have your appliances installed and maintained by qualified technicians, or they will refuse your claims due to improper installation or improper maintenance - and according to a lot of people's experience, the insurance companies love to do just that!

There should be another way - and, actually, there is - Putting money aside or creating an appliance budget for the time when your appliances break down or simply wear down and needs a replacement due to old age.

In our case, a refrigerator should have a life expectancy of 15 - 20 years, so you should expect to replace it after 20 years at the latest - if it does not wear out sooner, breaks down or you simply want a new fridge to fit in with your new kitchen decor. If your fridge costs about $1000, this means you need to put aside about $5 per month or $60 per year.

Counting in all the other appliances you have (oven, stove, dishwasher, washer, drier, air conditioner, water heater, etc.). In the same manner, we can quickly deduct you need to put aside about $600 per year. In 20 years this amounts to $12,000 (plus interest from the savings account in the bank), which should be enough to replace all appliances. Of course, if you have expensive high end appliances, you need to put aside a larger amount - $50 per month for a $10,000 refrigerator for instance.

We now have two ways of paying for repair or replacement of a broken or worn out appliance, so let's compare the pros and cons of both of them:

Appliance Insurance
Pros:

• You can be reimbursed for the full cost of repair or replacement of an appliance even if you paid just the first monthly rate
• You can sleep better at night, knowing your appliances are covered no matter what
• If you just bought a home with 20+ years old appliances, this might be the best option

• You need to read the fine print carefully to see what mishaps are covered; get the appliance insurance quotes from several insurance companies and read their Terms carefully
• Your appliances need to be professionally installed and maintained (you will need to archive all maintenance records) or insurance company might refuse your claim
• Over the years, you might end up paying a lot for the insurance - remember the insurance companies are in this business for profit

Putting Money Aside
Pros:

• You will not have to deal with insurance claim processing personnel - you will have money, so you can simply go out and buy a new appliance or have the old one repaired
• You will not need to wait days for the repair person authorized by the insurance company to finally show up at your doorstep
• You do not need to fear your claim being rejected due to improper installation or improper maintenance

• An appliance (or more of them) might break down before you have put enough money aside - this is especially true if you bought a home with old appliances
• You will need some self discipline to really put money aside every month
• Even if you've put money aside, you need to resist the temptation to spend it on something else

So, what should you do: put money aside or get appliance insurance? It depends - on your situation (old or new appliances, etc.) and your personality - do you prefer to pay the insurance fee to sleep better or be in control and are self disciplined enough to follow through on the savings plan.

It's up to you, of course. Read the pros and cons again, think about them, get some quotes from different insurance companies, read all the Terms and Conditions carefully (you'd be surprised how many people never read the fine print!) - this is where most of the catches are - and then make an informed and well thought out decision.

Good luck regardless of your decision and may your refrigerator and other appliances happily serve you for a long time.