Daily Archives:July 31st, 2008

Insurance endurance

I was reading a discussion about whether or not it was worth buying AppleCare – Apple’s extended warranty – on your new iPod/laptop/desktop. It reminded me of another discussion, several years ago, when a friend pointed out to me that all insurance policies of any sort will, statistically, lose you money. If they were worthwhile for the purchaser, they wouldn’t be worthwhile for the manufacturer/insurer, and they exist only because they make money. Money for other people. People who aren’t you.

Now, it’s not always easy to keep that fact in mind when you suddenly get a £700 bill for a new logic board on the laptop you bought 18 months ago. You forget that you saved £120 by not buying the extended warranty on the elderly fridge which is still working fine, and the TV, and more on the last laptop, and your last three mobiles… and so forth, all of which add up to much more than the immediate bill that looks so distressing.

So you should only buy insurance when the thing you’re guarding against is so expensive that you really couldn’t afford to be hit by it (which must also mean that it’s terribly unlikely, or you couldn’t afford the premium), when you’re legally obliged to, or when you have good reason to believe that it’s very much more likely to happen to you than to anybody else. For anything else, if you feel pangs of angst when the salesman starts putting pressure on you to buy his lucrative extended warranty, set up a special savings account and put the money there instead. If you can keep your head when all about you are losing theirs, you’ll be better off in the end, my friend!

© Copyright Quentin Stafford-Fraser