Monday, February 6, 2012

Toy Insurance

Back in my career as a mattress salesman I sold quite a lot of mattress insurance.  It wasn't presented that way of course, but rather presented as a service for cleaning or repairing your mattress should you damage it in some fashion.  It was very clear to us that the margins on this product were absolutely nuts and although it was a much smaller price than the actual bed a quite substantial amount of the money to be made by salesperson and company was in the insurance.

This sort of thing is everywhere from addons to your new vehicle to extra insurance on your laptop; a short while ago I was even offered insurance on the $5 batteries I bought.  In virtually every case the company makes a killing on these addons and the customer gets ripped off.  There are a few people who end up breaking their laptops and who are willing to send them to the shop for a couple months to have warranty work done but by and large this is just money down the drain from the customer's perspective.    That is, until now.  Yesterday I was pitched an insurance addon for the first time that actually made the product *worse*.

This unicorn makes all kinds of sounds when you push its button like:

"I love flying."

"Let's fly to the castle."

"Isn't my hair pretty?"

"I love it when you comb my hair."

"Let's play together."

ToysRUs offered me toy insurance on this treasure for the low low price of $2.99 so that if it breaks I could come back and get it replaced.  This was not a deal I was interested in, in fact I almost laughed out loud at the cashier.  The trouble with their sales pitch is that they actually needed to reverse the benefit.  If they had told me that for merely $2.99 they would *guarantee* the toy would be broken within a short timespan I might have bought in.  After hearing the unicorn's inane chatter for a few hours I was just hoping for some kind of "accident" to finish it off.  $2.99 is a small price to pay to shut the accursed creature up for good.


  1. For the most part I agree with you that insurance in general is a big scam and you should always turn down extended warranties and whatnot. For laptops I disagree. For a variety of reasons (laptops being highly prone to damage, budgeting issues with different departments, public relations, customer laziness...) I think it can make sense for both the salesman and the customer. Losing the laptop for a couple months is also an extreme and unrealistic portrayal. I forget how long it took to get my laptop fixed a couple years ago when it died but the delay in me getting around to sending it in and the delay in me getting around to getting it from the post office were both significantly longer than the time the repair shop had it.

  2. I have never bought laptop insurance myself but Butcher Knife did. He used the laptop for business and when it broke they told him to send it to the shop and to expect to have a delay of 6-8 weeks. Since obviously he couldn't stop using the computer for business for that length of time he had to just pay to get it repaired quickly by somebody else. Not everyone is going to have that situation but I assure you that 2 months is not at all unrealistic or outlandish; it may not be representative though.

    It is possible for an insurance policy on a retail purchase to make sense for the customer but it is an extreme rarity. Most of those policies have a margin in the 80-90% range which certainly indicates that it is practically worthless to the average buyer. There are some you can game brutally though by deliberately destroying your stuff 1 day before the warranty runs out and getting a brand new item but I don't generally hold with doing that.

  3. From what I've heard, you can get the battery insurance from the source and then return your batteries when they run out of power...


  4. I bet you can. However, the Source offered me battery insurance for $2 on a $5 battery. The batteries last years. Am I really going to remember that I have that insurance four years down the road and am I going to be able to find the paperwork? Even if it works I am not convinced it is worth the hassle. If the amounts of money involved were larger maybe, but for $3 I will just forget about it.

  5. Well, maybe he bought a terrible warranty? I don't know. The one I got from Dell actually was set up such that it was a local shop that repaired it but Dell found them, sent me a paid box to ship it in, and paid the bill. It was a matter of days, not months. It was also no questions asked so I totally could have 'accidentally' driven over it when the warranty was about to expire and gotten a new one if I'd really wanted to. I did upgrade to the 'complete care' warranty instead of the standard warranty you can pay for which may be why it was so much faster than your other friend.

    I worked with sales reps who knew all about the margins on things and to a man they all said they'd get complete care on a laptop but not on a desktop. And these weren't people I was possibly going to be buying from so they weren't trying to talk something up so they'd make some extra cash. High end laptops are expensive and plenty of things can go wrong which require replacing practically the whole thing. An extra $300 on $1700 for three years is a pretty good bet. Unlike the batteries these seem like numbers with both a good size and proportion.