Create Your Own “Extended Warranty” Fund To Self-Insure Purchases

Create Your Own “Extended Warranty” Fund To Self-Insure Purchases

It’s nearly impossible to make an electronic or appliance purchase without being offered an extended warranty. Turn down those over-priced extended warranties and set up your own protection fund. Photo by pasukaru76.

Every once in a great while you hear about someone who benefited from having an extended warranty, but chances are it’s never been you. Retailers make piles of cash off extended warranties that are never needed, and on many sales the profit from selling the extended warranty is higher than the profit from selling the actual item.

At the frugality blog FiveCentNickel they offer an alternative to extended warranties:

Instead of buying warranty after warranty, why not create an “extended warranty fund”. In other words, whenever a retailer offers you an extended warranty, simply transfer that amount of money into a dedicated savings account.

If/when problems arise, you can simply pay for the repairs (or replacement) out of your warranty fund. And once the fund builds up to a sufficiently healthy size, you can back off on your contributions.

There are two main benefits to self-insuring in this way. First, you’ll get to earn interest on the money as it accrues. Second, you’ll be the one that gets to keep the cash when your stuff doesn’t break.

After a string of particularly good luck you may even find yourself with a surplus of money that you can transfer to another account. Have your own trick for setting aside money for repairs and replacements without throwing money away on warranties? Let’s hear about it in the comments.

Create Your Own “Extended Warranty Fund” [FiveCentNickel]


  • I think what this article was about was the process known as ‘saving money’. Its very much the exact opposite of spending money, especially so on ‘virtual products’. Save your money, realise it will break eventually & repurchase something again, without extended warranty, again.

    Great article. No really.

  • So simple and so obvious when you stop to think about it.
    (stop for forehead slapping moment….)

    I’ll be doing this for my Apple stuff from now on. I love the Apple hardware and most all my gear now is that brand, having sat on the sidelines for many years..

    But I really have to laugh when you’re told for years by “Apple People” that Apple computers and gear is

    * “the best built gear you can buy..”
    * “it’s worth the price premium..”
    * “you have to pay to get quality..”
    * “..the build quality is industry leading…”

    and then they quickly add… “Just make SURE to pay extra for Apple Care..” LOL !!!

    My AppleCare $$$ will now go into a new account called TimCare as per the advice in the article…

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