Real Insurance Is Better than AppleCare

Recently, my brother-in-law decided to buy a 13 inch Apple Macbook Pro with Retina. He asked me if the AppleCare Protection plan, which costs $249 extra, was worth it. I told him no. For the same amount of money or less, one could get a better protection plan than AppleCare.

The AppleCare Protection plan is a 3 year extended warranty plan. It only covers malfunctioning parts. It does not cover accidental damage, loss, or theft. If you drop the Macbook and the display cracks or the laptop stops working, you are out of luck because AppleCare does not cover that. You will need to pay the full repair price, which could be $1000 or more to replace a retina display. If you spill water on the keyboard and your Macbook shorts out, that’s too bad. If you lose the Macbook or someone steals it from the safety of your house, oh well, that’s the way the cookie crumbles. AppleCare does not cover any of that.

What does AppleCare cover? Well, if your keyboard or display malfunctions through no fault of yours, then Apple will repair or replace that component. The Genius Bar members at your local Apple Store will check the Macbook for damage, such as large dents, that could cause the malfunction. If they find such damage, they can refuse the repair; if you are very lucky, you will get someone nice enough to allow the free repair. Be aware that Apple has put moisture detectors inside the Macbook so that if you spill water on it, the Genius Bar will know and can refuse the repair even if you have AppleCare Protection.

There is a reason why extended warranties are pushed so often by retailers. They make a lot of money off of them. Usually if a product such as a laptop were to fail, it would most likely fail during the first year when the product is still under the standard one year warranty. So if the customer pays for an extra year or two of warranty, that is considered an almost guaranteed 100% profit for the retailer. Not to say that there isn’t any case where a day or two after the one year warranty expired, the product failed and the owner was glad to have paid for extended warranty. That case is the exception though. The odds suggest not buying an extended warranty.

When most people buy AppleCare, I think they believe that they are buying insurance. They aren’t. Insurance could cover repair or replacement due to accidental damage, loss, or theft. AppleCare is not insurance. For the same amount of money, they could get real insurance that provides greater peace of mind.

First, before we talk insurance, make sure that you buy that expensive Macbook with an American Express credit card. (If you don’t have an American Express card, get one. There are basic American Express cards with no annual fee that provide the two benefits below.) Purchasing an item with an American Express card provides the following two benefits for free:

Purchase Protection: your purchase is protected for up to 90 days from the date of purchase from accidental damage or theft. You will be reimbursed up to $1000. (If you have an American Express Platinum card or similar, you get protection from loss also and up to $10,000.)
Extended Warranty: doubles the warranty on your purchase up to an additional year. For an extra year after the original warranty expires, if the purchase malfunctions through no fault of yours, you will be reimbursed the original cost (up to $10,000).

Purchasing the Macbook with an American Express credit card will add one additional year of extended warranty on top of the standard Apple one year warranty for free. It is a no brainer to do so. American Express service is very friendly. For example, the Wifi feature on my sister’s iPhone 4s broke (due to an Apple hardware defect) after she upgraded to iOS 7. Because it was past the one year warranty, Apple wanted $200 to replace the iPhone. I told my sister to call American Express to see if she was eligible for the free extended warranty. She was. They asked her to send them the receipt and then gave her a credit for the original cost of the iPhone. How cool is that?

Second, before buying insurance for your Macbook, check that you don’t already have it. You may have a rider on your house or rental insurance that covers your personal property such as electronics. Check to see what is covered. For example, my renter’s insurance covers theft and loss of personal property due to fire (burst pipes, etc.). Unfortunately, accidental damage is not covered. In the case of theft or loss, my rental insurance company will reimbursed me for the deprecated cost or if I purchase a replacement, they will cover the original cost. (This is nowhere as nice as American Express’ full credit of the original cost without requiring you to buy a replacement.)

If you don’t have a rider for personal property like electronics, you may want to ask your home insurance company about one. It may be the cheapest option because a rider is considered part of the bundle and you may get a better deal that way. Homeowners on forums provided some examples such as $40/year for $2000 coverage (much less than AppleCare) or $80/year for $5000 coverage for malfunctions, accidental damage, loss, and theft. The insurance cost seems to vary widely (one homeowner mentioned $15/year, another $30/year for $4000 coverage, and a third mentioned a deductible of $50).

Instead of a rider, you can purchase personal property insurance directly. Most likely, standalone insurance will be more expensive than a rider. The most recommended standalone insurance for a Macbook is an Inland Marine Insurance policy (can be gotten from several insurance companies like AllState, State Farm, and Farmers Insurance). Though originally created to cover expensive electronics on boats, the policy applies for land usage also. In a forum post (Best Insurance on Earth for your MacBook / Air etc. Far better than AppleCare), one person mentioned that it costs about $32/year for $1500 coverage of multiple devices with no deductible. (It was mentioned also that the Inland Marine Insurance policy did not cover phones.)

Another insurance mentioned was State Farm’s Personal Articles Policy, which costs $60/year for $3000 coverage. There are also insurance companies, like Safeware, that sell policies specific to high-end equipment and electronics. As with all other types of insurances, make sure to shop around to get the best deal.

When talking about insurance for electronics, Square Trade is a name that often comes up. Square Trade costs about the same as AppleCare; but in addition to the extended warranty, Square Trade covers accidental damage. Because Square Trade does not cover loss or theft, I believe that it is not the best deal. Square Trade is better than AppleCare but you can get better insurance than both for less.

Insurance is personal. I do not purchase extra insurance, such as extended warranties. (I do use an American Express card to take advantage of the free extra year of warranty though.) I am gambling that I’ll be careful enough not to break my Macbook, lose it, or be robbed. Considering all the money I have saved from not buying extra insurance or extended warranties on my many laptops, even if I have to pay full price to replace a Macbook, I will break even or come out ahead. However, if you feel more comfortable having some protection (nothing wrong with that), please consider the alternative options above to AppleCare. You will get much more bang for your buck.

Chanh

Hi,

I did a little digging into Asurion and it seems that most cell companies use them to offer phone insurance to their customers. As with any insurance, you’ll have to check if it makes sense for you. Asurion does provide coverage for lost, stolen, and damaged phones but the details are important. Here’s a critical review of Asurion by PC Magazine, titled The Great American Phone Insurance Rip-Off, that outlines some concerns.

As an example, my friend paid T-Mobile $10/month for insurance for her iPhone 5s. Almost two years later, after she has paid close to $240, she lost her phone recently and tried to submit a claim. She found out that she had to pay a $100 deductible and she would end up with a refurbished phone. Now, one can get a used or refurbished iPhone 5s for $200. So she ended up paying $340 ($240+$100) for what is a $200 refurbished phone. She would have been better off without the insurance; but then again, if she had lost her phone early on (after a few months, instead of 2 years), she would have been better off with the insurance.

From the PC Magazine article and my friend’s experience, I would suggest keeping an eye out for the following:

Who is the cell phone owner? Is she a careful person or someone prone to accidents? If he drops the phone a lot (onto concrete floors, into toilets, etc.), even expensive insurance may be worth it.
What is covered? Lost, stolen, damaged? Cracked screen? Water damaged? Is there a limit to the coverage? Like $400 max?
Will I get the same model phone as a replacement or some other phone that the insurance company considers equivalent? New or refurbished?
What do I pay monthly? If you are paying 50% of the cost of the phone in a year’s worth of insurance, then it probably doesn’t make sense to insure the phone. I think the informal rule of thumb is 10-20%.
When should I reduce or eliminate coverage? As your phone ages, its refurbished replacement cost will drop. Eventually, you’ll end up paying a lot of insurance to insure something that isn’t too expensive or worthwhile to replace. You will want to end the insurance at that point.

I suggest looking at the numbers and shopping around. Or if that is too much of headache (no judgment ’cause there are a lot of things I don’t like to do either), just take the Asurion insurance and ask for the answers to the above so you will know what to expect when you need to submit a claim.

December 5, 2015 Reply

3 Comments

Hannah

Thank you so much for the comprehensive info!

October 27, 2015 Reply
Cookie

Thanks for the info? I want to purchase a MacBook Pro 15 inch. Was going to get from Best Buy but they only offer AppleCare. My daughter purchased her Mac Book Pro 13 inch from her college and they gave her a phamplet for Asurion.? Do you know anything about a Asurion besides cell phone coverage? Asurion Cover drops and breaks, not sure about theft.

December 5, 2015 Reply
- Chanh
  Hi,
  
  I did a little digging into Asurion and it seems that most cell companies use them to offer phone insurance to their customers. As with any insurance, you’ll have to check if it makes sense for you. Asurion does provide coverage for lost, stolen, and damaged phones but the details are important. Here’s a critical review of Asurion by PC Magazine, titled The Great American Phone Insurance Rip-Off, that outlines some concerns.
  
  As an example, my friend paid T-Mobile $10/month for insurance for her iPhone 5s. Almost two years later, after she has paid close to $240, she lost her phone recently and tried to submit a claim. She found out that she had to pay a $100 deductible and she would end up with a refurbished phone. Now, one can get a used or refurbished iPhone 5s for $200. So she ended up paying $340 ($240+$100) for what is a $200 refurbished phone. She would have been better off without the insurance; but then again, if she had lost her phone early on (after a few months, instead of 2 years), she would have been better off with the insurance.
  
  From the PC Magazine article and my friend’s experience, I would suggest keeping an eye out for the following:
  - Who is the cell phone owner? Is she a careful person or someone prone to accidents? If he drops the phone a lot (onto concrete floors, into toilets, etc.), even expensive insurance may be worth it.
  - What is covered? Lost, stolen, damaged? Cracked screen? Water damaged? Is there a limit to the coverage? Like $400 max?
  - Will I get the same model phone as a replacement or some other phone that the insurance company considers equivalent? New or refurbished?
  - What do I pay monthly? If you are paying 50% of the cost of the phone in a year’s worth of insurance, then it probably doesn’t make sense to insure the phone. I think the informal rule of thumb is 10-20%.
  - When should I reduce or eliminate coverage? As your phone ages, its refurbished replacement cost will drop. Eventually, you’ll end up paying a lot of insurance to insure something that isn’t too expensive or worthwhile to replace. You will want to end the insurance at that point.
  I suggest looking at the numbers and shopping around. Or if that is too much of headache (no judgment ’cause there are a lot of things I don’t like to do either), just take the Asurion insurance and ask for the answers to the above so you will know what to expect when you need to submit a claim.
  December 5, 2015 Reply