Should you buy a protection plan for your electronics?

Most of us have either lost or damaged a phone, or know someone who has. This can be more disruptive than ever given that we use our smartphones and tablets for email, social networking, banking, shopping and even to control home security systems and appliances.

With so much of our lives connected through these electronic gadgets, the sudden loss of one sets off a panicked scramble to replace it and restore the data on it.

That brings us to a question we've all wondered about at some point: Is it worth shelling out the extra bucks for an extended protection plan for your electronic gadgets? Paying for an extended warranty can feel like throwing money away -- but it can be worth every penny when you suddenly need to replace the device.

If you think such a replacement is covered by your home or auto insurance, think again. These policies cover losses only due to specific risks and only after you pay the deductible (which most folks set at $250 to $500).

What about the extended warranty provided by your credit card? Credit cards can extend the manufacturer's warranty up to a maximum of one year, which typically covers mechanical breakdown, but this may not cover claims involving loss, theft or accident.

One of the challenges is that if you want to be fully protected for each phone, tablet, laptop and computer in your household, you need to buy a separate protection plan for each, and the costs can really add up.

But a company called Protect Your Bubble, a specialty protection brand, aims to change that. This week it announced an all-in-one protection plan that covers multiple devices. The benefits include a single policy with multi-device coverage at a lower cost that what's available directly from the manufacturer or your cell phone carrier.

Protect Your Bubble's cost is about $6 per month to cover a single mobile phone, tablet, laptop or PC, and the cost is lower for each device added under one plan. According to a press release from Protect Your Bubble, "The more devices customers cover, the more they save. For example, it costs $5.99 a month to insure a family's first iPhone 5S, but then they can add another iPhone 5S for $4.99 and a third iPhone 5S for only $3.99."

Protect Your Bubble also says, "Protection plans are available for devices within three years of purchase, and devices are eligible for coverage until they are three years old." You can buy protection on any device at any time as long as you bought it new or recertified (used devices privately purchased don't qualify).

Buying protection for an iPhone or tablet seems like a good idea because the replacement cost without any subsidies can exceed $600. Most folks carry these gadgets virtually everywhere, so the risk of damage or loss is high.

But some products are less likely to be lost, damaged or break down, so buying protection on these doesn't usually make sense. According to Consumer Reports, current repair rate for some electronics has fallen since CR's last survey in 2010. The repair rate for laptops is currently about 24 percent, down from 36 percent, and 7 percent for LCD TVs, down from 15 percent.

Here are a few guidelines to consider when looking to buy an extended protection plan for your electronic gadgets and appliances.

  • If the cost of a plan is more than 20 percent of the item's purchase price, that's expensive, and the plan's cost could be higher than the cost of a typical repair.
  • If you rely on the device to run your business and quick replacement is important, buying a protection plan is advised.

Before you buy, read a sample policy and get information about the claims process, so you know what's covered under what circumstances, what you have to do to submit a valid claim and how long it takes to receive a replacement.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.