What Is A Warranty?

As we are in the busiest time of the year for buying electrical goods such as mobile phones, games consuls, TV’s and everything else that has a plug on it, it is also the busiest time for retailers to sell extended warranties. These are guarantees that give you greater cover against damage or breakdown than the guarantee that usually comes as standard with the item you have bought.

They can come as a product that is bought at a one off price at the time of purchase or can be a monthly payment that lasts as long as the warranty is designed to run. They can be specific to the item you have bought, or can offer “blanket cover” over several qualifying items. One thing they all have in common is that they are all a bit different!

Before you agree to buy an extended warranty on anything you need to find out a few things:

  1. What does the guarantee that automatically comes for free with the item cover and for how long? You may well be happy with having that.
  2. Is the cost of the warranty worth it? I once bought an iron for £20 and the optimistic salesperson tried his hardest to sell me the £15 warranty.
  3. What does the extended warranty actually cover?

    Let’s look at these a little more closely.

    What does the guarantee that automatically comes for free with the item cover and for how long?

Most things you buy in this country come with some form of guarantee against it breaking down or developing a fault. Although this seems straightforward, there are things you should be aware of. Firstly, it relates to things bought in this country. Online purchases made from abroad or even purchases while you are in another country may not have the same protection as you can expect from buying in the UK. As a general rule, it is a wise move to make such purchases with a credit card as that will give further protection to you if things go wrong. The Money Advice Service gives a good summary of how this works, click here to read it.

The next thing to look at is how long is the guarantee? One year is quite common, but by no means can this be taken for granted. Any period is possible, and obviously, the longer the better! If the item has been “refurbished”, “display” or is sold as “seconds”, the guarantee may only be a month. It still should be of merchandisable quality though and you should enjoy the same consumer rights as if it were sold as new.

A lot of guarantees require you to fill out a registration card at the time of purchase so you can easily be found should you get in touch. I’m sure that acquiring names and addresses for marketing purposes doesn’t even cross their minds. If you do not fill out the registration, it can make claiming on the guarantee more long winded and awkward, but it should still be honoured, so be persistent.

Although Guarantees have a lot in common and meet broadly similar minimum standards, they can, and do, have wide variations. It should be treated as a legal contract and as such you should read what is in it. If there is anything in it you do not understand, then you should ask about it before purchase. Citizens Advice have a page devoted to The Consumer Rights Act 2015 which is well worth a visit

Is the cost of the warranty worth it?

Seriously, this is a matter of common sense. If you are buying an item that you can easily afford to replace if you accidentally throw it at the telly while watching England getting knocked out on penalties again, then don’t spend anything on a further extended warranty. You may have an accidental claim on the telly through your insurance though.

If it’s a warranty that you are going to pay for monthly, then add up the total to see if it is worth it. Often the retailer is getting a commission for selling the extended warranty. knowing this, I have occasionally used this to my advantage and got the price of the item reduced. certainly doesn’t work every time, but it has worked, and if you don’t ask – you don’t get!

When working out the value of the warranty, it’s not just the price you should consider. There will be a long list of terms and conditions on the contract and it really is down to you to read them and decide whether or not to run with it. These terms and conditions will set out the circumstances that the item can be repaired or replaced and who meets the cost of getting the item to and from the repairer. Do not assume anything. If its written in the forms, then that’s what they will refer back to. if it’s not written in the forms, then they will argue the point.

What does the extended warranty actually cover?

The big print will refer to breakdown and damage amongst other things. The small print will specify which parts qualify and which parts won’t, there can also be maximum cash limits and time limits. The fact of the matter is that you will be offered an extended warranty with no more than a “Would you like the warranty, it costs xxxx amount” If you buy it on that basis, you really have no idea what you have just bought and as the chances of a potential claim arising is very low, the chances of you paying for something you do not need and is no use to you is highly likely.

The events that are covered are set out in the warranty paperwork, you must read it as every one is slightly different. Most are “Service Agreements” rather than “Insurance” products and as such they are not regulated by the Financial Services Authority.

What can I do to make a good decision?

The main thing you can do is not buy it until you know exactly what you are buying. Be awkward and ask questions and ask to see the relevant paperwork that confirms what you are being told. The Money Advice Service has written an excellent piece on extended warranties which I recommend you read. There is also an online comparison website which is a really useful tool when deciding whether to buy one or not.

Coffee Mugs?

“May I have a coffee, please”

“Certainly, that will be 21 minutes”

My coffee of choice is a latte, not skinny, no syrups just a straightforward latte. In Costa, a medium size latte will cost £2.55 and is typical of the price of a coffee in many cafe’s up and down the country, be they global chains or single outlets. it’s a price that I have been fortunate enough not to take much notice of over the years. Then I retired and prior to turning my full attention to writing, I decided to take a part time job to keep me occupied and pay my bills, it was there that I experienced the “minimum wage.” Currently £7.20 an hour for the over 25’s.

It was also there that the cold reality of the link between how long I worked and the cost of things really hit home. The bottom line was that I needed to work 21 minutes to buy a cup of coffee. Several friends of mine buy a take away coffee every day on the way to work. That’s £12.75 per week. A good percentage of those same people buy a £3 meal deal for their lunch. That’s another £15 per week.

So… One coffee and a meal deal is £5.55 a day. That’s £27.75 a week. That’s £1332 a year! (I used 48 instead of 52 to take account of a few weeks holiday!) To go back to my minimum wage calculation that equates to having to work 11,100 minutes or 185 hours. About a working month.

According to the Office of National Statistics, the average weekly wage in the UK is £539 per week. As someone living in the West Country, I have huge issues with this figure as I know few people earning close to this in the area I live. However, for my current purposes, I will run with it as even on that figure £27.75 still represents over 5% of the average weekly wage. Even people lucky enough to be on average earnings work over two weeks just to buy lunch.

Throughout my career I felt it was not my job to question the financial decisions people made. Rather it was my job to clarify a situation and set out realistic options to solving problems. If someone wants to spend over £600 a year on take away coffee then they go with my blessing. But I wonder how many that are spending that much have looked at the cost a bit more closely. I wish I had long before I “retired”

Fees and How to Avoid Them

Why am I being charged a fee?

The answer is simple, it is because the company charging it either cannot survive without charging it, or the company charging it knows it can get away with it… in the majority of cases anyway.

How is the Fee Calculated?

In several ways. Insurance is highly competitive so one thing a company looks at is the fees that its competitors are charging. If it is working for them, then its’s about right. Next, they will look at their own costs. This varies whether you are dealing direct with an insurance company, or using an intermediary such as a broker or online comparison company.

If you are using a broker that has given you a service such as professional advice, then you would expect a fee would go toward the the cost of running an office, training and regulatory costs. If you are not getting advice, either going online or direct, then your attitude toward the fee would, I suspect be very different.

The Gift that Keeps Giving!

While, in a lot of cases, an appropriate fee can be justified at the commencement of a policy, the ongoing fees that are levied are a lot more difficult to defend.

It is crucial that you keep your insurance provider up to date with changes in your circumstances. If you do not, then your cover is very much at risk. However, one off charges of up to £50 for changing your address or adding (or taking off) a named driver from your policy are, frankly, outrageous.

There is no doubt that the competitive nature of the cost of insurance means that companies do what they can to show a premium as low as they can get it. There is an argument that says this in itself is a huge problem because it may also be that the low premium is because the cover given is not that great. That’s a discussion for another day. With regards to fees and admin charges, they help to boost the income of the insurance provider whilst allowing them to appear to give good value premiums.

What Can I Do About It?

Insurance providers love people that are lazy. People that don’t bother to shop around at renewal, people who just let their direct debit chug along without checking the amount going out, and definitely people who do not question what they are up to. If you see an admin fee on your new quote, or on your renewal, the first thing to ask yourself is do you think it is reasonable? As I said before, there is a genuine case for reasonable admin fees. If however you do not think it is, then talk to them. They may convince you that it is justified, or, you may convince them to reduce it or get rid of it altogether!

Fees that are charged for changes to your policy are a little more tricky to deal with. To get the best result here you need to have looked at the terms and conditions of the policy at outset. You would at least be aware of the costs involved before you make changes. It is still the case though that you can contact your provider and see if the charges can be cancelled. You won’t be lucky every time, but in my experience the chances are about 50/50. Don’t forget that you can switch providers during the term of your policy. You need to be careful here as there are repercussions regarding the allocation of  No Claims Discount, especially on motor policies, but if this is not an issue then you should be able to switch providers quite easily in order to get a better deal following something like a change of address.

 

Are you insured against Father Christmas?

For insurance purposes, Santa is no different to any other intruder…

By any definition, Father Christmas is an intruder. Possibly one with a large, semi domesticated mammal as an accomplice. So what happens if your property is damaged during his visit? Or Rudolph is injured while navigating your hallway?

Your home insurance policy cover is relevant for both these events. Firstly though, it needs to be established whether or not Santa has actually been invited as a welcome guest or, like a benign burglar, he has just taken advantage of poor security. The answer may lay in the tradition of leaving food for both Santa and Rudolph, typically a carrot and a mince pie. It can be argued that by leaving these items you are tacitly inviting him into your home. A “Santa Please stop here” sign is definitely an invitation!

As an invited guest, there is no cover against him taking anything from you. This is not likely to be an issue given that his purpose is the complete opposite. However, what if he knocks your iphone off its charger and it breaks? Or Rudolph is particularly taken with your Waitrose Essential carrot and causes a particularly fine piece of majolica to topple over? The good news is that such events will almost certainly be covered under the “Accidental Damage” section of your policy.

But what if he is not a welcome guest? The only alternative can be that he is a trespasser, and as such the damage described above could be construed as criminal damage. For a claim to be successful there should be forceful entry and this is where you may find yourself in difficulty. The insurance company may well take the line that Santa’s modus operandi is common knowledge and question you as to what precautions you took with regard to blocking the chimney. It is unlikely that they will accept not having a chimney as an adequate answer. You could then possibly go down the route of suggesting that magic was used in the incident. From an insurance adjusters point of view, magic is rarely used in their reports as a cause, though I don’t want to put you off completely if you are convinced.

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If you do make a claim, believing your loss to be a result of criminal damage, then the insurance company will insist that you notify the police. It will be down to them to decide how to investigate the incident. It is unlikely that you will be able to satisfy them as to forced entry, but it may be worth reflecting a little before presenting the possibility of magic being involved. The courts are no stranger to trials involving magic, however it has been over 300 years since they were common, so finding suitable legal argument may be difficult.

On balance, your claim is more likely to be dealt sympathetically if you do not accuse Santa of breaking and entering.

There is a section on your policy called “Property Owners Liability”. This section protects you from claims following injury or damage from third parties who are on your property and have suffered due to your negligence. The good news is that the cover is in place regardless of whether the third party is there by invitation or not. In short, it does not matter whether Father Christmas was there as a guest or a trespasser, if he or Rudolph injure themselves in your house due to your neglect, they can (and should) claim against you.

In such circumstances, you should take as much detail as possible about the incident, contact details and photographs are ideal. Santa is almost certainly self employed and should be carrying his own liability insurance details, which you should take. You should notify your insurer straight away and, after giving a statement yourself, it will be down to them to handle the claim. If an injury is involved, they may ask for medical (or vets) reports before offering a settlement.

It is not possible to cover all the possible insurance implications surrounding Santa’s visit, but this brief guidance should be enough to reassure you. If you have any questions about any of the above, just have a word with your broker or insurance company – I’m sure they will be delighted to help!

Merry Christmas