Service Plans??

[chasineyes]

I'm wondering if many of you partake in some service plans offered by the local gas and/or electric companies. Our home is going on 10 years old and I'm worried we might be getting closer to things breaking. We just dodged a bullet with our furnace and the thought of a $1000 repair bill was a little stressful.

THanks

[echotrail]

25 years ago I had a service agreement for about 4 years and cancelled it because there was a clause that said if the repair exceeded a certain $ amount or if certain parts fail they had the right to deny the coverage and recommend you buy a new appliance. (Happend to my neighbor with his furnace). Last summer I had a problem with a 12 year old oven and for the $65 service fee I found out it was only repairable with a used part with no warranty so we bought a new one. Two months ago I replaced our 1982 furnace with a high efficiency one and was told it should last about 15 years. After ten years most of your appliances are going to need to be replaced anyhow.

[aanderud]

I tend to shy away from such plans. It's really just insurance, and to me insurance should only be purchased for things I can't afford. Examples of this would include my own death (and my family's loss of income forever), the possibility of injuring or killing someone with my car, or the possibility of losing my job, or the possibility of my house burning down. These are extremely high-cost events. However, because they're also relatively low-probability events, the insurance is affordable relative to that high cost. I don't mind paying the insurance company a little profit in this case. Because of that low probability, I am NOT expecting to use the insurance, and the insurance company doesn't expect me to pay a huge sum relative to potential claims.

On the very other end of the scale is the $8 extended warranty that sears will offer you on the $50 small appliance. In this case, people mostly laugh on the way out the door because they figure "if nothing else I'll just buy a new small appliance when this one breaks outside of its original warranty". You'll always come out ahead if you just save up whatever you were going to pay for this minor nuisance.

Home appliance failures are somewhere in the middle, but I still claim they're more like the extended warranty than they are like catastrophic insurance. The probability of the events happening is what makes it, IMHO, different enough from the catastrophic insurance that I stay away from it. Appliance repair and replacement is something that you WILL expect to have happen, and as such the insurance company WILL expect you to be paying for that (through the premiums they're charging). Save the premiums, you'll be ahead in the longrun.

[SFC]

I was paying a extra 45 a month had everything covered under ser.+ . 3 years ago had them come clean and inspect my furnace for 100 bucks, they cleaned it and when done said my heat exchange had a crack in the face plate that he hadnt noticed before he started the service. I needed to replace the furnace plus pay for the cleaning. About 2 years ago had them clean and check out the air conditioner because we were having a party with about 50 people coming and it was hot out. 2 days later air not working, they couldnt make it back to check it out for2 weeks. Payed someone else to fix the air, Canceled the service havent had a problem since am about 900 dollars ahead. Put away that extra money to fix your own problems.

[Scupper]

My Father taught me to have an emergency fund. He explained that it would help defray the cost of the unexpected in life. Some 50 years ago I started stashing away $5.00 a month. Paper route money. Over the years I gradually increased the amount but broke it down to weekly installments.

I recently read a good article about saving money. Bottom line is, the amount one puts away, isn't as important as putting it away. Start off with saving a dollar a day which is right around the amount of one of these monthly service plans. 20 years from now you will be amazed at the amount you have used and the amount you still have left. It's really that simple.

Remember, this fund is to offset future unexpected expenses. It takes discipline not to use this money for Want's.

Good luck.

[Whoaru99]

I agree with most of the posters so far.

It's like any sort of purchased warranty (insurance), a few people will think it's the best thing since sliced bread because they collect...most people in the end will think it was not worth it because they paid more than they got back.

And, as other's have said, saving that money towards a repair is going to be better in the long run for most people than buying the plan.

[shizzy]

like all things, it depends on the cost. If its $5 a month then sure. if its some $2000 policy then no.

I have road side assistance on all my vehicles through my insurance company. $28 a year and my wife's and my vehicles are covered. I've used the service three times already in two years. If it was any more money I wouldn't have it.

the cost difference between a $250 deductible and a $1000 deductible was only $60 a year. It made no sense to go with $1000 deductible to save $60.

[SkunkedAgain]

My wife thought that I was crazy when I unveiled to her how I saved money. When we got married and started our joint checking and savings accounts, I created a spreadsheet split things into "funds." We've got funds for every one of our expected monthly expenses. In our joint savings, we've got a housing fund for purchases, repairs, service costs, and replacement expenses. We've got funds like that for auto, boat, cabin, investments, travel, misc, etc. It's fun to watch all of the funds go up. At some point I'm sure that my 1997 furnace or 1989 A/C unit will go out. It's nice knowing that we've got the cash to deal with those issues as they come up. As other folks say, I just take the money that I would put into a service plan, and put it into my Housing fund.

The only real insurance plan that I pay for outside of mandated car/home insurance is AAA. We drive long trips enough and don't have new vehicles, that it's worth the $120/year to know that there is one number to call for service. I've used it many times over the years so the cost mostly balances out, but I'm paying for peace of mind, because Mrs SkunkedAgain can get help with a quick phone call when I'm out of town.