You are Not Alone in Thinking Most Appliance Warranties are a Scam

Steve Sheinkopf  |  October 21, 2016  |  3 Min. Read

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I remember peering into the window of an appliance store years ago. There was a big sign offering 5-year warranties for $59 anywhere in the United States. So if a Sub-Zero or even a front load washer purchased in Boise, Idaho from a store in Mass, it will be fixed for basically nothing?

Forget Boise, how about Boston.

We now have 23 service techs on the road. I can tell you one thing for certain: There is no way this product will be fixed competently for a $59 warranty. Yet cheap warranties have become more common especially among internet retailers who have no means of fixing problems in remote markets.

But I did not realize how bad this situation actually is until this website arrived in my email inbox.

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Better Business Bureau Complaint:

"This company offered me a cheap warranty on all my appliances through email. So I checked them at the Better Business Bureau. They have had over 2390 complaints in 36 months. However, this paragraph was the kicker with a court judgment of $776,000 against the company."

Division of Consumer Affairs comments: (business name redacted)

The Division’s Complaint, filed in Superior Court in Middlesex County, alleged that XXX induced consumers to buy the so-called “home warranties” – which were actually service contracts – by stating they offered “comprehensive” coverage. The Division alleged that XXX then used deceptive tactics to deny consumers’ claims, such as denying claims if the consumers were unable to submit multiple years’ worth of maintenance records. As a result, consumers who paid hundreds of dollars for XXX’s “warranties” were required to pay out-of-pocket for air conditioning, refrigerator, or other repairs that were purportedly covered.

In other words, their warranties were worthless.

So you think this is an outlier? The number one supplier of warranties has 553 complaints in 12 months. They have changed their name, which is why they do not have more yet.

Here is How a Typical Warranty “Works”

You buy a warranty at 80% of the appliance stores in the US. You are actually buying it from an insurance provider, which is just a call center. They have some contracts with some independent contractors at low labor rates.

These independent servicers will not handle any long-duration repairs like front load washers or compressors for refrigerators. It is not worth a 3-5 hour repair for $75-$100 labor rate.

It leaves you very little recourse because your appliance store is not directly responsible. The call center cannot help you because the technician is not an employee.

So you are left to complain to the BBB (who ironically gave the warranty provider above a C+ rating). In fact most of the bad reviews on appliance dealers are service related due to the lack of service available.

How to Buy a Warranty

Ironically, I never believed in selling service contracts until the fail rates of certain appliances became more commonplace. Refrigerators, pro ranges and wall ovens are good considerations for warranties because they are expensive to repair. They also need repairs at a greater percentage than other appliances. Laundry is another good consideration. It fails only 11% within the first year but is expensive to repair.

You should only buy a warranty from a company with an actual service department. They will actually have the techs to fix the machine. They also sold you the machine and will be obligated to fix even a tough repair.

Luckily in the Boston area, you have a few options with good service companies like: Poirier out of Norwood and Newton, Belchers is out of Framingham, KAM Appliance is in Hanover and The Cape. As much maligned as Sears is, they have a decent service department.

However, you are most likely being scammed buying an appliance warranty. You only need three pieces of information to determine the likelihood of being covered:

  1. Does the store have an actual service department?
  2. Check Google and Yelp to see if the service is worth paying more for extra coverage
  3. Check the Better Business Bureau for the number of complaints. Their grades should be ignored, because it is so favorably skewed to businesses

That’s all. The warranty will probably cost more than $59, but at least it will be worth more than a piece of paper and slick marketing.

Additional Resources

Looking for some answers to your appliance questions? Read the Yale Appliance Buying Guide with profiles of the major brands, when to buy appliances and reliability percentages. Well over 190,000 people have read a Yale Guide.

View our appliance buying guide

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Steve Sheinkopf

Steve is the third-generation CEO of Yale and a lifelong Bostonian. He currently resides in Boston, one mile from where he was born. Despite being one of the worst goalies of all time, he is a huge hockey fan of college hockey and the Boston Bruins. The love of his life is his daughter Sophie.

Steve has also been featured in numerous publications such as the New York Times, Consumer Reports, The Boston Globe, Bloomberg Radio, the New York Post, The Wall Street Journal, and Entrepreneur, for his knowledge of how to buy appliances and appliance repair.

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