Insurance & Warranties: What’s Actually Worth It? What’s Really Not?

It feels like you can’t buy anything without being offered an extended warranty for an extra fee at the checkout counter, but are any of those service plans and insurance offerings even worth it?

The truth is, some of those plans are an absolute must, but most warranties aren’t necessary. From your home itself to the items you use everyday, we’ve got the lowdown on what you should insure, what you can buy without an additional warranty, and how to decide if a purchase you’re not sure about needs extra protection.

Most electronics and appliances—big and small—come with some sort of manufacturer’s warranty. Usually, the warranties or insurance you can purchase along with the product you want is an extended warranty or service plan to cover you after the manufacturer’s warranty is up. In many cases, the manufacturer’s warranty (which comes free with your purchase) is good enough and lasts long enough without that costly extension.

Not all extended warranties cover the same things, so you need to read the fine print before you say yes. A service plan that covers accidental damage might be more worth it than a plan that only covers if the product turns out to be faulty—usually, if a product is faulty, the included warranty is long enough to catch any issues in time. A warranty that’ll protect you if you drop your laptop? A lot more useful than one than an extra year of coverage for something that likely won’t happen.

As the New York Times points out, buying insurance or an extended warranty on your purchase is basically like making a bet that something terrible will happen to it within the plan’s time frame, and so it feels like you’re spending a relatively small amount of money to save yourself from spending more when the inevitable occurs. And as with all bets, you should do some math about your odds before you jump in. Before you make a big purchase, like a refrigerator or a TV, do some research about the fail rate percentages of those products. Your warranty shouldn’t cost more than that percentage of the item’s price—if it does, it’s probably not worth it.

If you have a good credit card, you may not even need to purchase extended warranties altogether. Many credit cards (Visa, Discover, Mastercard and American Express) actually provide an extra year of conditional coverage beyond the warranties of products you purchase—for free—without you even knowing. Each credit card company’s offerings have different nuances though, so you’ll have to check with your provider.

There’s no doubt about it, renter’s insurance actually is worth it, so here’s what you need to know about it. First, renter’s insurance is relatively inexpensive—usually less than $20 a month. It may not seem important, or you may think that since you’re only a renter, you’re safe in case anything happens to your home, but the truth is that’s just not the case. Renter’s insurance will protect your personal belongings (no matter how much or how little you think is valuable) and protect you in case something in your apartment damages someone else’s property (think flooding from your bathroom making a mess of the apartment downstairs.) Of course, no two renter’s insurance plans are the same, so you’ll have to look for one that fits your needs, but overall? It’s a must.

Most extended warranties on electronics aren’t worth the cost, but according to Digital Trends, Apple’s extended service plan is actually a good idea. The brand is known for it’s great tech support, it’s relatively inexpensive in comparison to the cost of the products you’re buying, and it covers accidental damage, which makes it a lot more valuable than other plans.

Unlike renter’s insurance, home warranties aren’t always the best idea. In some cases, home warranties can be useful—again, you’ll have to do research on individual plans to see if one actually suits your needs—but most of the time, they’re not worth it. Why? According to the Los Angeles Times, home warranties often don’t cover the majority of what you hope they’ll cover, and you don’t even get to choose the contractors, plumbers or electricians who come to fix any problems you do face, because you have to go through the warranty company. Plus, unless you have an unusual number of necessary repairs, your home warranty will actually cost more than the cost of the repairs without the warranty.

Often, smartphone insurance plans cost you a monthly fee and come with a high deductible you must reach before the provider will cover repairs or replacement fees. The insurance fee itself may seem low—$10 a month isn’t so bad, right?—but if you pay that for a year or two and have to reach a deductible when something happens to your phone, it might actually be more cost effective to just purchase a new phone altogether.

Most household appliances and electronics have very low failure rates—so the odds you’ll ever have to use the regular warranty or even an extended one are in your favor. They also generally come with great warranties and service plans on their own, and again, your credit card may secretly extend the warranty anyway for free. Whether or not a particular warranty actually is worth it should be determined on an individual basis, but in general, you can skip them.

So what do you do if you don’t purchase a warranty, but you’re still worried about future mishaps? Consumer Reports suggests setting aside the money you would have spent on an extended warranty or insurance plan for something in your home, and putting it in a savings account instead. That way, you have an emergency fund in case your purchase does have a problem, and you’re past the original warranty or the manufacturer won’t help you.

The most important thing to remember? Always do your research before you make a big purchase. Choose products that are known for their quality and staying power, have low failure rates, and positive reviews. Read the manufacturer’s warranty and see where you’re covered. If you choose products that have a proven track record and a strong warranty, you probably won’t ever need those extended plans.