They're Lining Up to Sell You Protection
Retailers know that the best time to get you to pay to protect expensive items is while you are making a big-ticket purchase. For years, Best Buy (BBY), Sears (SHLD), Walmart (WMT), and other major retailers have sold extended warranty protection on high-priced electronics like computers and TVs. That coverage can be pricey, with Walmart having recently charged $65 for a two-year TV service plan and Best Buy offering two-year coverage on an $800 TV for $99.99 and five-year coverage for $179.99 . Appliance warranties can also be expensive, with Sears recently charging $280 for a three-year protection plan on a $950 refrigerator.
Protection plans for smartphones and tablets are also popular. Apple (AAPL) offers its AppleCare for its devices. Coverage to extend an iPhone's warranty and other protections for two years will run you $99. Other companies have sought to offer more comprehensive coverage for electronic devices, with Protect Your Bubble offering phone and tablet insurance for $7.99 to $9.99 a month that covers not only mechanical problems but also common mishaps like damage from drops and liquid spills, as well as theft or loss.
Many Items Have Built-In Protection
What many consumers don't realize is how much protection against common problems they already have, even without buying extra. Nearly every purchase comes with at least limited warranty protection for mechanical defects. According to Consumer Reports, most issues that would qualify for coverage under extended warranties tend to happen during the initial warranty period, making the extended coverage essentially worthless.
On the other hand, even high-priced protection won't cover every loss. Some liquid-damage coverage won't cover you if you drop your smartphone in a swimming pool, for instance. Moreover, with certain policies, if a loss happens right after you sign up for coverage, you'll find that the protection doesn't begin until after an initial period.
The other key thing to consider with gadget insurance is the fact that if a loss occurs, you might end up having to foot a big part of the bill.
For instance, Protect Your Bubble charges deductibles of $75 for basic mobile phones, tablets, and laptops under $1,000, with that deductible rising to $100 for items above $1,000. Apple iPhones get a higher deductible of $120. When you factor in monthly insurance premiums, that means you could end up spending $300 or more if you actually need to make a claim -- $300 that could otherwise have gone a long way toward replacing a device even in the unlikely event of loss. Similarly, Apple charges a $79 service fee for accidental-damage repairs on top of the initial cost of coverage.
Be a Smart Shopper
Protecting yourself against bad luck might seem like a smart move with a pricey electronic gadget. But for most people, gadget insurance will end up being a money-waster far more often than it proves to be a money-saver.
Motley Fool contributor Dan Caplinger owns shares of Apple. You can follow him on Twitter @DanCaplinger or on Google+. Dan owns shares of Apple. The Motley Fool recommends Apple, MasterCard, and Visa. The Motley Fool owns shares of Apple, MasterCard, and Visa.