If you have ever bought ANY type of consumer electronics then you have no doubt been pitched a product protection plan.  These "insurance" plans are a favorite of electronics retailers.  They will often spend more time trying to sell you their protection plan than they do the actual product.  That should tell you something!

While recently shopping for an LCD television the salesman at a major electronics retailer proceeded to tell me that I should buy one of these plans.  His reasoning was that Consumer Reports recommended them for television sets.  This however is untrue.  Either the sales person was badly mistaken or he was blatantly lying to me to make a sale.  I'll give him the benefit of the doubt since Consumer Reports did at one time recommend these plans for rear-projection TV's only.

In reality, Consumer Reports says that these plans are of little value to the consumer and a great profit for the retailer.  For those reasons, they advise against buying these types of plans.

Retailers continually push these plans because they can many times pocket at least half of the plans purchase price.  This makes them one of the highest margin items in their store so it makes since they would try to sale as many of them as possible.  On top of that, they are making a strategic bet that you will never use the plan, thus making it 100% profit.

So what should you do?

First, buy quality products.  Some things are worth paying a little extra for.  Do your research and make sure you are buying from both a quality manufacturer and a reputable retailer. 

Second, consider putting your purchase on a major credit card such as Visa, MasterCard or American Express.  There are those that say you should never use these cards regardless of the reason.  I covered many of the arguments against that logic in a previous post here.  In addition to those arguments another reason is that these cards will many times extend the manufacturer warranty.  Most of the time the coverage is doubled.  For instance, if your purchase has a 1 year warranty, if you buy it on one of these cards that warranty is doubled to 2 years.  You should check with the institution that issued your card to find the details for your specific account.

The bottom line is that the majority of these plans will provide you with very little return for your investment.  The odds of you actually needing the service provided by the warranty is slim and if it is needed the odds that the problem you encounter is covered by the policy is even slimmer.  So do your homework and be prepared when shopping to make sure you don't fall for the sales persons pitch.