Posted in SIC, on 10/29/2018
Goodbye, Extended Warranty. Hello, Trov On-Demand Insurance
Here's how Trov replaces the extended warranty with on-demand protection for your valuable purchases.
It’s a familiar kind of angst.
At check-out, having just laid out several hundred bucks for a thing, you’re offered an extended warranty.
You cringe in the throes of conflict: on one hand, your prudent self says you need the extended warranty because your new thing will likely break just as the manufacturer’s warranty runs out. On the other hand, your consumer-savvy self suspects that the extended warranty is a rip-off and will probably never be needed.
It’s a quandary. We've become conditioned to buy insurance as it gives us peace of mind that if something goes wrong, we know someone's got my back. However, the extended warranty is missing a big chunk of the "we've got your back" promise because it only covers half of the "real life" perils (you’ll see why in a minute)—hence, the dilemma at checkout.
It’s time to examine this gap and point out exactly what’s missing and why it’s time for the extended warranty to step aside and make room for something much better.
THE EXTENDED WARRANTY HAS BEEN A HISTORIC RUSE OVERDUE FOR A SERIOUS IMPROVEMENT. NOW, TROV'S DEBUT IN THE USA IS THE FIRST REAL ALTERNATIVE TO REPLACE IT.
First, we should briefly discuss a warranty and an extended warranty (a.k.a. an extended service contract/protection) to see why the latter presents an unnecessary dilemma for consumers.
How the Manufacturer’s Warranty Works
Almost all commercially available consumer goods come standard with a manufacturer’s warranty. As the name implies, the maker of the product warrants that what they’ve made (and now you own) is free from defects of material or workmanship. Should defects arise they will repair or replace the item free of charge. Most companies will make that claim for a year; some may offer that assurance for the life of the product. It’s important to note that a warranty is not insurance, per se. For example, a manufacturer’s warranty does not include coverage for risks like accidental damage, theft, or loss of the item.
Enter the Extended Warranty
The proposition of the extended warranty is that it takes over after the manufacturer’s warranty terminates, in effect extending the same assurances for a longer period of time. The “extension” is usually about two or more years and generally presents the same proposition as the initial manufacturer’s warranty.
Sounds like a reasonable proposition, right? A closer look might convince you otherwise.
7 Major Problems with the Extended Warranty and How Trov Fixes Them
1. The extended warranty is sold at or near the time of sale, which pressures consumers to make an all-or-nothing decision quickly.
The extended warranty is generally only offered at the time you purchase an item or within a few days, at most 90 days. This is intentional, of course, as the purveyors of these promises know that you are much more likely to purchase a warranty when the product is shiny and new and your dopamine levels are at their highest. This “buy now or never” as a scarcity tactic causes undue stress—and the only party enforcing this false time window is the seller of the extended warranty.
With Trov, there’s no pressure at the time of purchase. You can turn on coverage with Trov well after your purchase.
While an extended warranty must be bought typically at point-of-sale or within 30 days of purchasing the item, Trov is built for your on-demand lifestyle. Turn on protection right away or turn it on far after your purchase. Its flexibility is unsurpassed and aligns perfectly with the expectations of the modern consumer.
2. The extended warranty is expensive, and you pay well in advance (even if your product is already protected).
Let’s say you purchased a Nikon DSLR camera for $2,000-$2,999. One of your options would be to buy a two-year extended warranty from a seller such as Upsie for $148.20. Using Upsie’s T&C’s as an example (they’re not much different from others), you’d find a paragraph stating that the extended warranty’s benefits don’t apply “for failures that occur during the manufacturer's warranty period.”
In other words, you don’t experience the benefit of the extended warranty until after the manufacturer’s deadline expires, usually one year after you buy the extended warranty.
The problem with this is you may not own the product for anywhere near that amount of time, depending on the product’s ownership arc. A musician who buys a handcrafted guitar may expect to never part with it; while her laptop or DSLR camera may be replaced every 18 months or so. Something is not right when you’re forced to part with your cash a year before the benefit of the service starts to apply.
Trov's solution: You don’t have to pay one hefty price years in advance. Instead, pay monthly as you go, like Hulu or Spotify—and only for the protection you used.
Trov charges only for the time its protection is utilized—with to-the-second accuracy—so you don’t overpay a penny. (While many in our community use Trov like traditional insurance, activating protection and leaving it on—most tell us they really like that protection can be turned off any time with a simple swipe on their phone.) Once activated, Trov reminds you before the beginning of each month of the items you’ve protected, and what you’ll be charged for in the coming month (think Hulu or Spotify). This is our monthly outreach informing you that you’re in control, showing you what protection you used the previous month, and what you’ll be charged if you keep it rolling into the next month.
3. The extended warranty requires less regulatory compliance (depending on the state) making it easier for anyone to sell it.
Unlike the insurance industry, which sets high regulatory bars and hurdles that limit who can sell (or even talk about) insurance, the extended warranty is not as stringently regulated by state government entities (some states don’t regulate service contracts at all). With less government supervision, third-party affiliates and retailers can sell an extended warranty and charge whatever they want to make a profit.
Whereas: Trov is an insurance technology company that has received regulatory approval in almost all 50 states.
Unlike extended warranty sellers, Trov's unique “all-in-one” insurance policy has been approved by each states’ respective department of insurance; it’s compliant, transparent, and cedes unprecedented control to you—the intelligent, connected consumer. Trov is real insurance reinvented to meet today’s consumers needs.
4. The extended warranty makes you pay for a contract that lasts 2-5 years.
Once you pay for an extended warranty it becomes onerous to cancel it and get a full refund. It’s often a manual, time-consuming process through snail mail—meant to be as arduous as possible so you are less inclined to do it and the warranty provider doesn’t have to refund your money. If you sell your product, donate, upgrade, or hand it down to a family member, you've paid for something you won't use because extended warranties are often not transferable.
Trov doesn’t lock you into a contract for 2-5 years. You can turn it off with a simple swipe on your phone.
No calls. No emails. No hoops or red tape to start or end a contract. Instead, a swipe on your phone (like Tinder) turns insurance off instantly. So if you get a twinge of “buyer’s remorse,” don’t worry: simply turn off coverage, stop paying, and feel better.
5. The extended warranty offers premiums that don’t adjust.
Remember the Nikon DSLR camera you bought for $2,000-$2,999? Let’s say you wanted to buy a third-party extended service contract for three years to protect it. If you plug in the numbers at SquareTrade, an extended warranty company owned by Allstate, you’ll receive a contract priced at $499.99, paid upfront. However, at the end of the three-year term, your camera isn’t worth $2,000-$2,999 and yet you paid for coverage during that period for a $2,000-$2,999 device. The premium didn’t match the value of the item protected over time. As the value of the device changed, the premium stayed the same. Meaning, you overpaid.
However, Trov's Smart Premium adjusts automatically to match the market value of your item. So you don’t overpay as time goes on.
Never pay for more insurance than you need: Premiums adjust if the value of the item insured changes. This has never existed before in the US. When we quote your premium, the monthly amount is calculated on the current retail replacement value of your item. When that value goes down, say from new products introduced in the market, upgrades to the item, or simple depreciation—your premium adjusts accordingly. It only makes sense to pay to protect the value of your item, right? Wahoo!
6. The extended warranty is almost never managed electronically. Out of sight, out of mind, by design.
How many times have you wondered if your [insert the name of your thing] is still covered by warranty, and searched in vain for any evidence that would help answer the question? Most warranties are not managed in the way that modern consumers expect—electronically, online, accessible by any connected device. Few of us keep the extended warranty information around since it was purchased long before the time it might actually be needed. In other words, the extended warranty peddlers want you to pay and forget.
But with Trov, you can manage all of your coverages from any device.
If you insure a number of things from different brands (e.g., Apple iPhone, Taylor guitar, Ray-Ban sunglasses) you no longer need different retail and manufacturer accounts to keep track of each of your extended warranties. Trov is brand and manufacturer agnostic, so you can protect a broad range of items through the app and have a single view of all protections in your Trov—and a single bill that conveniently rolls them all into one.
7. The extended warranty offers limited coverage with lots of conditions and loopholes (because it’s not full insurance).
Extended warranty/service contracts are limited to protecting your item in the event of an out-of-warranty mechanical breakdown. In other words, if it’s after one year and your manufacturer’s warranty is expired and you bought the extended warranty, your item could be covered for incidents such as dust, internal overheating, internal humidity/condensation, and defects in materials or workmanship. However, be sure to examine in the fine print what is not covered. This list will often be 3-5 times the length of what is covered. And almost every time, at the top of the not-covered list, it will say something along the lines of no lost, stolen, or irretrievable items—the very risks you’re hoping it would protect against.
With Trov, coverage is broader (includes lost, stolen, and damaged items) and it's global.
Trov covers the same mechanical defects and promises to fix or replace items as an extended warranty, but also adds more types of events to its coverage, including accidental damage, lost, and stolen items. And it’s global; get Trov protection in Arizona, don’t worry about it in the Alps.
Extended warranties are minimally beneficial, out of date, and frankly, a questionable consumer proposition (in most cases). Their economics heavily favor the warranty provider who banks on the user forgetting about their coverage, making them intentionally hard to manage. Trov, on the other hand, delivers real value to people, offering full control over when to activate protection, fuller insurance coverages over and above a manufacturer’s warranty, and modern digital management. So next time you’re in the store and offered an extended warranty, just tell them you’d rather “Trov it!”