I recently had the opportunity to interview Stephen Ebbett, President of ProtectYourBubble.com. Protect Your Bubble is a third party gadget insurer (extended warranty provider). We talked about buying an extended warranty. We talked about when you should and shouldn’t buy extended warranties. We also talked about the difference between insurance and warranties.
Why are extended warranties offered for every imaginable gadget and electronics? Why do they seem to be on the rise and offered by every retailer imaginable? Do they deserve the bad rap that they have gotten? Is buying an extended warranty right right you?
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Below is my interview with Stephen Ebbett. My questions are in bold. And his responses are right below each of them. Hope you enjoy!
Tell us a little bit about “ProtectYourBubble,” what is it, what do you offer on the site?
We’re a specialist insurer, and we’re also an insurance company strictly for gadgets such as smart phones, tablets, laptops, and cameras. We offer both insurance and also extended warranties as well.
And we just provide choices to customers of the different options they might be able to buy. One of our competitive advantages is the speed at which we replace your device. So if you lose or break your device, we’ll ship a device out to you so you’ll have a new device the very next day.
Why bubble? What is that a reference?
We’re cognizant that our lives these days they’re very fragile. And particularly when it comes to smart phones, you know, we need to be connected. To a certain extent, our world is quite fragile, kind of this bubble, and it can burst very easily.
And if you’ve ever been away from your smart phone for more than 24 hours, you’ll know what that feels like. So we wanted to kind of have a message that we’re there to we protect your bubble and help you to keep safe. And people seem to like the name.
What’s the percentage of people that buy extended warranties at like the point of sale, versus a third-party like Protect The Bubble?
Thirty to 40% take the kind of point of sale extended warranty and insurance option inside a big box retailer or at a cell phone carrier. And then the after-market solution is there for people who don’t decide to do that.
I think what we’re seeing more and more is that consumers want to do their own research. So they don’t necessarily want to buy these first and only option given to them. They want to be able to shop around, and they want to be able to look at coverage, price, deductible, and service.
Then they can make a decision like they do with so many other things in their lives. They want to have the ability to make an important decision on their own two feet.
For the third-party extended warranties and insurers, is the speed for replacement, service, deductible, cost, etc., are these the competitive advantages of third parties insurers?
Third party extended warranties are going to be agnostic of carrier, agnostic of brand. We’re going to cover you, for instance for a smart phone, for any manufacturer and any carrier. So you’re not tied into any specific solution.
And the other thing that consumers are looking at is price and deductibles. Deductible is one that consumers don’t often think about.
Insurance policies and warranties that are sold in big box retailers are looking at the masses. This is how much I’m paying in terms of premium. This is how much I’m likely to have to pay in deductible, and then they have to assess the value of the warranty or insurance from there.
Quite often consumers use the word warranty and insurance interchangeably. And actually they’re two very different things.
Let’s say if you’re getting a warranty, that’s going to cover you for accidental damage and breakdowns. So it’s going to cover you if you drop your phone, if you spill liquid on your phone, if something gets faulty with the phone, etc. It’s going to cover you for that.
And that’s where a warranty stops. An insurance product is going to cover you for the same aspects of a warranty or extended warranty. But, in addition, it’s going to cover you for theft and loss of your device.
So if someone steals your device which we are seeing a lot of, and if someone steals your device, you’re covered. And also, if you mislay your device, if you don’t know where it is and you left it on a public transport or somewhere, it’s going to cover you.
So there’s a real difference between the coverages. A warranty is a non-regulated product, and an insurance product is a regulated product.
So that the big difference? Theft and loss aren’t covered in what we would consider extended warranties or warranties?
Correct. And we see about 65% of all claims coming from theft and loss. Unfortunately, a tablet or a smart phone is very easy target for thieves. They’re on us the whole time. They’re accessible, and they’re very easy to sell on sites like eBay. And the value doesn’t depreciate too much.
But it’s quite unlikely that you’re going to lose a television for instance. And if it’s stolen, it’s likely that someone’s going to break into your house and steal it. That’s going to be covered probably on your home insurance policy. So I think that items that you particularly take around with you a lot are the ones you should think about insuring.
It seems to me that extended warranties had really increased in popularity over the last couple of years. Is that true? And why have they become more popular?
It’s absolutely is true. You know, we’re seeing sort of 15% to 20% year-on-year growth over the last 3 years. And I think that’s because we’re all so connected to all our devices and our gadgets and that the thought of being without them is very difficult for a lot of consumers to get their head around. And the cost of these devices is increasing significantly. So gone are days where it only costs $100 to replace your phone. It’s now costing you $600 or $700 for the full price of a smartphone.
So I think the increase in connectivity, which I think is from social media, and the fact that a lot of us conduct a lot of business now on our smartphones, plus the actual increased cost of the device, is the reason we are seeing a lot of market place growth.
There seems to be a bad connotation that extended warranties just go straight to the bottom line for businesses. Consumers often feel that they’re an up sell that’s just pure profits. Is there any truth to that?
I think historically, that’s the connotation. And I think now, with the advent of direct players, companies aren’t necessarily taking it directly to that bottom line because consumers now have a choice. But previously they wouldn’t have had a choice.
Now they have a choice because they can shop and they can choose something else if it feels the price that has been offered by the retailer is too much. There are plenty of options for them to companies like Protect Your Bubble and others to make sure that they are getting the deal.
People want to stay connected. They want to keep a device. Shop around and make sure you’re getting the right price. And make sure that you feel that the price that is being offered at the retailer is fair and that the coverage is worth it to you.
Are there any types of insurance or extended warranties that consumers should skip?
I see a lot of common sense here. We offer coverage for the full range of products from smart phone, tablets, cameras; all the way through to toasters and microwaves.
We don’t see a lot of insurance purchases for toasters.
And I think what we advise consumers to consider is, what would my life be like not having this device and what would the cost if I wanted to replace that particular unit be. If your TV was to break down outside of the warranty given by the manufacturer, it could be a $3,000 or $4,000 bill.
If I was without my smartphone, what would that be like? So it’s the type of things that I think we encourage people to have insurance on are the obvious ones that people insure like laptops, smart phones and tablets.
We also encourage people to think about things like cameras. There’s been a big boom in the last 5 years of expensive digital SLR cameras. I’m witnessing a lot of growth in that category as well.
Are extended warranties insurance better for lower to middle class Americans who can’t afford to basically like self-insure?
We actually see that, really, the spread is very, very broad, regardless of income, ethnicity, age, sex. We don’t really see too much difference.
I think sometimes there can be an assumption that a more wealthy consumer would just self-insure, but I think a lot of people who have realized that the value of insuring. I’m actually going to save quite a lot in the long-term.
A smartphone insurance policy with Protect Your Bubble is $7.99 a month. It’s going to cost you $600 to $700 to replace that iPhone. That’s a lot of monthly premiums you have to pay before you reach that point. So you’re seeing a return regardless of your own personal economics and fortune, and you see value in insurance and warranties.
I had a home warranty that covered my appliances and HVAC in my house. And I had a claim denied because the piece I broke wasn’t covered in the policy. And so I just was wondering, are there a lot of exclusions that would cause my claim denied for insurance and extended warranties on my gadgets?
No. I think unfortunately that’s where the insurance industry traditionally has got a bad rap for hidden terms, exclusions and limitations. We’re certainly trying to change that and trying to make the policy very, very transparent.
We have very, very slim exclusions on the policy. The only thing that we’ll ask the damage is, that you didn’t deliberately damage the device. For instance, if you tell us you dropped the device, but it looks like you ran a car over it. Which we see, unfortunately we see someone who says, “I was walking along and it fell out my pocket,” and now it’s in 500 pieces.
So we’ll do some checks to make sure that the damage is in line with what we would expect to see. Our philosophy is that is important to get a device back to you as quickly as possible and not to hide behind terms and conditions in the policy. So we just try and be very simple.
What do you think? Have extended warranties and gadget insurance gotten a bad rap? Do you like them? Do you buy them? Do you buy them at the store or wait to come home and do your own research before buying?
Like the benefits of a home warranty, there are several benefits to extended warranties for consumers. I’d love to hear your thoughts in the comment section below.
This is one type of insurance I normally avoid because I have heard bad reviews from customers that insurers make it almost impossible to claim. I understand that there would be a few people who would try their luck but it is good to hear that there are companies who are genuine. Another point is that the store insurance or warranty is really expensive. In most case I come across, the premium is about one third of replacement cost. Then, it doesn’t make sense. It is not insurance at that price. There is no way that one in three customers are making claims to charge that level of premiums. So, customers should shop around if they want this type of coverage.
I never buy extended warranties for electronics, since the hardware becomes outdated within a couple of years. That doesn’t mean that I don’t hang on to electronics for many years until they eventually die, but by that time, I am usually ready to buy a new replacement. The one item that I wish we had had insurance for was my wife’s smart phone. She has the best phone in the house because she uses it so much. She lost it on a cruise ship last year. It cost $350 to replace, although the replacement was a step up in the cell phone hierarchy. All I could say was, “Stuff happens.”