Don’t Be A Homer!

by Chris Markham. 0 Comments

Rather than discuss Obamacare insurance (which I’m certain you’re all still very interested in), this week, I want to talk about other types of insurance, specifically warranties. There is a great line in the Simpsons when Homer is trying to get back to a low IQ (don’t ask – long story). As he’s getting dumber and dumber, he says non-sensical things. When he says “extended warranty, that sounds like a great idea!” the “surgeon” says that his work is done; Homer is back to being as stupid as he used to be.
In a great many of the transactions we conduct, warranties are a way of life. You buy a car, there’s a warranty. You buy a house, you can get a warranty to cover some of the property’s systems in case of failure. You buy a television – well, you get the drift.
There are some warranties out there that are worth it. None come to mind, but I’m sure they exist. However, there are a great many more that are just a confirmation of the old adage “A fool and his money are soon parted.” How can you tell which are which?
Actually, there are a few warranties that come with certain items. A home carries a warranty of habitability – an acknowledgement that the property has been constructed to local and state codes, has been inspected and approved by local officials and is able to be lived in. Most other items comes with a warranty of fitness for a particular purpose, which is to say, if you by a television, you should be able to hook up your cable box to it (or your dvd player, surround sound system, whatever) and you can watch shows and movies.
However, proving a manufacturer or a contractor violated these warranties is kind of tough. You need indisputable evidence that the home or item was not constructed so it could be used. Even if the house falls apart or the shoes don’t have soles, you still have to go to court, which, as we all know, can be costly and time-consuming.
I know none of you want to hear this, but I’ll say it anyway – you have to read the fine print. Most of these crooked warranties will put, in very small print, exactly what they will and will not cover. Additionally, with the “what they will cover” section, they’ll include numerous exceptions to those rules. So you end up with something like this: We’ll cover damage to windows. Unless said window is not maintained in the correct and workman like manner as set forth in Subsection IV(a)(1)(i) through (xx), or the window is facing the outdoors, or the window is broken by any event including but not limited to:… You get the idea.
That’s why you have to pay ridiculously close attention to what the warranties say. When you buy a television or computer, the warranty may only be applicable if you send the item back to the manufacturer in a very precise way – say US Postal Service instead of UPS, or using a certain type of box or label. If you don’t follow these directions to the letter, they may bounce your item out and say they won’t cover any repairs because you didn’t follow the requirements.
This is a bit cheeky on the part of the insurance/warranty company – they accept your money on the basis that the house, car or electronic equipment won’t fail, and charge according to the chances there may be a repair at some point for some client. Every dollar they don’t have to pay is one more dollar in their pocket. Thus, the byzantine rules and requirements you have to navigate to receive some sort of benefit for the policy you were issued at the point of sale.
My intent here is not to scare you off of purchasing a warranty; rather, I’m encouraging you to become educated about the warranty you plan on buying. As noted earlier, in some instances, warranties can be very useful. However, you have to ensure that the warranty you’re purchasing actually covers something (basic wear and tear excluded) and that there’s some wiggle room with respect to your requirements under the warranty. If those two things are strict and stricter, than you might be better off taking your chances.
Which leads us back to a basic premise of all of my columns – read and understand what you’re signing before you sign it. Don’t be a Homer!

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