I first wrote about SquareTrade back in 2009. At the time, I was overjoyed at the concept of warranties from Square Trade. If you don’t remember, 2009 was the era of incredibly overpriced extended warranties from electronics stores. It turns out that companies like Circuit City were selling merchandise at a tiny profit, and making all of their money by having their salespeople push high cost extended warranties on anything. Even worse, when you tried to collect on that coverage, it turned out that your warranty wasn’t actually from the company you bought it from, but some business you never heard of, and that didn’t really care what you thought about them, their service, or their coverage.
Is SquareTrade a Scam?
First off, SquareTrade is a legitimate company. It’s been in business for a long time now, and has plenty of satisfied customers. The time for calling the business a fly-by-night outfit has long since passed. However, there are some complaints about SquareTrade. Many of them stem from not fully understanding exactly what your are paying for, and how the coverage works.
I just bought a new, Samsung Galaxy S4 cell phone. I thought it might be instructive to look at how SquareTrade works by considering my purchase and the coverage option.
One nice thing about SquareTrade is that it is easy to get a price upfront, before you have to commit to anything, or call, or give out a bunch of your personal information. In this case, there is a special plan just for Samsung Galaxy phones. (There are also specific plans for iPhones and other popular devices.) On the day I looked, 2-years of coverage is either $99 as a single payment, or $5.99 per month.
I can already tell you that the SquareTrade warranty is cheaper than what Sprint was offering. Coverage from them was $11 per month, or nearly double. If you do the math, by making the one-time Square Trade payment, you only pay $4.13 per month which is an even better deal on coverage.
SquareTrade Warranty Review
Now, let’s review SquareTrade warranty coverage itself.
The biggest thing to notice right away on this plan is the $99 deductible. That works just like your car insurance. If anything happens to this Galaxy S4, coverage does not kick in until you’ve paid $99 out of your own pocket. So, for example, if your phone need $135 worth of repairs, you owe $99 and Square Trade covers only $36. The in-house Sprint coverage has a deductible (up to $200) for most repairs as well, so that is comparable.
Another way to evaluate the cost of the SquareTrade protection plan is to see how much you have to pay before you come out ahead. In this case, if you paid the one-time fee, you need to pay $198 before you break-even.
The next step to review the SquareTrade warranty is to see what is covered. This is the one place where the company really does well. Everything from drops to spills to hardware failures are covered. The number one question on most people’s minds is what if I drop it in water, like a pool or toilet, and even that is covered. However, keep in mind that the $99 deductible still applies.
When Can I Buy SquareTrade Warranty
The number one problem with insurance, including property insurance, is what’s called adverse selection. That is, the people who are more likely to collect on the insurance benefits are the most likely to enroll in the insurance coverage. For health insurance, they deal with this by only allowing you to enroll at certain times, or under certain circumstances. For example, your health plan at work probably has an open enrollment period during which you can sign up for your insurance. That way, you can’t wait until you feel sick to enroll.
For property insurance, warranties generally have to be purchased right away to avoid a customer noticing a problem on their phone, for example, and then signing up. Although each warranty is different, in this case, the cellphone warranty must be purchased within 30-days of buying the phone. You’ll need a receipt to prove your purchase date.
Whenever you are buying anything like this, always perform this type of analysis.
- How much does it cost if I don’t use it? ($99)
- How much does it cost if I do use it? ($198 — cost + deductible)
- What is covered? (most things except theft)
- How long does coverage last? (2 years)
How To Use SquareTrade Protection
Finally, you want to know HOW to use your coverage. In this case, you’ll call SquareTrade and then ship them your phone. They’ll try to fix it and ship it back. If they can’t fix it, they’ll pay you for a new one, but only the amount you paid in the first place. In other words, if you get a smoking hot deal for your Galaxy S4, you’ll only get that much money out of your SquareTrade warranty.
Here is where a lot of people end up thinking SquareTrade is a scam when they try and file a claim. I paid just $100 for my phone after the buy one, get one deal from Sprint with my 2-year upgrade discount, and the rebate. If I buy a warranty from SquareTrade, I’m basically only getting $100 in coverage, and at $99 + deductible, that makes a SquareTrade warranty worthless in my situation.
Sprint Phone Warranty
This is where the Sprint warranty would actually win out. Unlike SquareTrade, Sprint, has a warehouse full of Galaxy S4 phones and they’ll actually just send me a new one if mine breaks. In other words, this covers the main problem with broken cell phones, you only get the discounted contract price once.
It doesn’t really help me to just cover my purchase price. I need coverage for the REPLACEMENT price. If it hasn’t been two years, I have to pay the inflated, $500-ish price to actually replace my phone. That’s a pretty big hunk of change, but there really isn’t a SquareTrade option that helps with that, unless I paid that full $500 price in the first place.
Is SquareTrade Right For Me?
Remember analyze your situation specifically and be sure to understand all of the details before you buy. For cell phones bought with a contract discount, SquareTrade is not a good deal for you.