You have finally decided on a refrigerator. Compared prices, sizes, energy efficiency and other features. It seems like all the decisions have been made, until you get to the checkout, and you have to make one more decision – whether to purchase additional product protection.

These additional programs – sometimes called extended warranty, or service plus or protection programs – aim to reduce the buyer’s worry that the products may fail after the manufacturer’s warranty expires but before the buyer has enjoyed all the benefits expected from that new refrigerator, computer or other major household item.

Consumers may view that all protection plans are essentially the same. But there are significant differences between coverages offered. The important points of differentiation are described in the Consumers Council of Canada’s 2018 report Consumers and Product Insurance Purchase Decisions.

The report compared the coverages offered by numerous leading Canadian retailers in 2017-18. Comparisons across retailers showed there were many similarities. Items almost universally found in service contracts included:
• language that the contract was the entire agreement
• information about how to file a claim or arrange service
• rules about transferability and cancellation
• limits on liability to the purchase price of the product
• language that allows them to fulfill the contract by issuing a cheque or gift card for the value of the original purchase
• an articulation of what is covered, and not covered. “Not covered” commonly includes items that have had unauthorized service, accessories, peripherals, components with limited life (batteries and bulbs), cosmetic or superficial damage that does not affect a product’s operation, damage caused by natural or man-made disasters, loss or theft, wear and tear caused by normal aging, and abuse, misuse or deliberate damage.

While those were the areas almost always included, there were a number of areas where programs studied showed significant variance:
• Protection on replacement units. Most contracts clearly state that the contract terminates when a replacement item is issued to the buyer, but a few specifically extend the protection to also cover replacement items issued.
• Technical assistance to help with installation or troubleshooting is sometimes provided, sometimes not.
• The location of service – and whether the buyer has to pay for delivery to a specific service depot – also varies between plans. Some plans provide for in-home service.
• Some plans begin coverage only after the expiration of the manufacturers warranty, while others begin with the date of purchase.
• Some contracts provide for temporary replacements (“loaners”) while damaged items are repaired
• Language around coverage of damage is particularly varied, and important. Except for computers and smartphones, most contracts specifically exclude coverage for accidental damage. However, the popularity of handheld items that can be easily dropped has led to some offerings of protection for accidental damage from handling. This is commonly optional coverage – consumers can choose to pay extra for it. Furniture coverage may also include optional coverages for certain accidental spillage. Intent is also crucial in determining whether a claim is covered. Coverage on a dropped telephone is different from coverage of a telephone hurled in anger, and coverage of spilled drink on a sofa may be different from coverage of a toddler’s Sharpie drawings on a sofa (which may not be considered “accidental” by the service provider.)
• Optional damage coverage is one example of choice. Some providers offer different levels of service so that consumers can choose to pay higher amounts to have service performed in their home, levels of technical support above product defect or to choose different durations of the coverage.
• Another differential element of some programs are terms that allowed unused premium payments to be used as a discount on future purchases.
• Coverages can differ by province, though few consumers can choose the province in which an item is purchased.

Though the contract print is often exceptionally small, consumers should read it before making a purchase decision. The research found that misunderstandings about what was covered (1st) and misleading statements by sales representatives (3rd) were among the most commonly cited sources of consumer unhappiness.