Service contracts for consumer products can lead to cost savings in the future. How to protect an expensive purchase is often top of mind for many consumers and business owners, as they want to ensure the item will last for the long term. Additionally, accidental damage is a major concern for many items, like smartphones and tablets, that could easily be dropped and broken. A service contract ensures that the out-of-pocket cost of repair or replacement will be covered or lessened. 

One example of a service contract is as such: a consumer purchases a new TV from a big box store, and upon checkout at the register, the cashier asks if they’d like to buy a service contract plan to help protect the item above and beyond the original manufacturer’s warranty.

Consumers might wrestle with the idea of whether or not buying a service contract is worth the cost. It’s important to keep in mind that a manufacturer’s warranty may only cover certain parts of the item, and they often will not cover accidental damage. For instance, a new laptop that falls out of a backpack, or a 3-year-old dishwasher begins to experience mechanical issues, events such as these create inconvenience and unexpected expenses for customers.

The manufacturer’s warranty may also end just a few months after purchase when the product is still relatively new and in good shape. The service contract offers consumers peace of mind that their expensive new item is protected for a longer term and covered for additional issues on top of what the manufacturer might offer.