AS YOU hand over your card to pay for electrical goods, you are likely to be offered an extended warranty. But is this type of insurance policy – offering cover beyond the manufacturer’s one-year guarantee – worth the money?

Warranties don’t come cheap. An extended warranty for an Xbox can add 10 per cent to the purchase price. An Xbox 360 elite costs £299.99 and, depending on where you buy it, a warranty can cost an extra £34.99 for three years, or £54.99 for five years. For a £269 iPhone, meanwhile, a warranty for only one year’s extra cover costs £33.50.

Nevertheless, it is easy to understand the temptation to fork out for extra cover. The number of complaints handled by Consumer Direct, the Government’s consumer advice group, has increased by 30 per cent since last year, while the increase in complaints about games consoles has more than doubled.

However, shoppers have more rights than they may realise and need not pay for expensive warranties. Which?, the consumer group, says that the Sale of Goods Act specifies that goods are meant to be of satisfactory quality and should last a reasonable amount of time, which means that if your iPod breaks one day after the one-year manufacturer’s guarantee expires, you should still be entitled to a repair or refund.

What is a “reasonable” amount of time will depend on the item. Peter McCarthy, senior lawyer at Which? Legal Services, the telephone advice helpline, says: “It would be reasonable to expect most goods to last more than the standard one-year guarantee, which many manufacturers give. You would not, however, reasonably expect a £20 DVD player to last as long as one costing £200.”

If you go to the shop with a complaint and it refers you to the manufacturer, do not be deterred. Your contract lies with the retailer and not the manufacturer. Mr McCarthy says: “Often retailers will try to direct you to the manufacturer with problem goods, but do not be fobbed off – you are well within your rights to turn to the retailer with problematic goods.”

Whether an extended warranty is worthwhile depends on the value of the item, the cost of the policy and whether the policy contains any unfair exclusions. For instance, if an item is less than £100 and an extended warranty for five years costs £50, it is unlikely to be worth the extra cash. Which? found a £17.50 Kenwood smoothie maker being sold with a three-year extended warranty costing £14. Frank Shepherd, of Consumer Direct, says: “If an item is inexpensive, it is cheaper to buy a replacement than to pay for an extended warranty.”

Many extended warranties offer a refund of the premium, marketed as a “cashback”, if you do not make a claim for a set period. However, Consumer Direct says that many people forget to claim, especially if the warranty is for as long as five years, and the warranties are riddled with exclusion clauses, such as a time limit for registering for cashback status.

If you do want extra cover, Consumer Direct says to check first for free guarantees. Home insurance policies often include cover for damaged personal gadgets. Direct Line and Churchill offer new-for-old replacements on personal items as part of standard home insurance if they are damaged in the home, but do not cover general wear and tear or faults.

If you do buy an extended warranty and decide that you do not want it, remember that you can cancel within 45 days of the date of purchase.

CASE STUDY

COMET MAKES SLOW PROGRESS

JUNE SQUIRES, of Essex, bought a Phillips 42-inch HD-ready television for £1,664 from Comet, the electrical store, last summer. At the same time, she bought a five-year extended warranty for £400.

The television broke two months after the one-year manufacturer’s guarantee ran out, so Mrs Squires contacted Comet to claim on her warranty. Comet disputed her cover before agreeing to send an engineer. He could not fix the television, but said that he would come back with new parts. He did not return for three weeks and still could not fix it. Mrs Squires has now requested a full refund from Comet and says: “The service was bad and I have now been without a television for more than a month.”

After Times Money got in touch, Comet said: “Our service centre will contact Mrs Squires to arrange for her television to be exchanged. We will also arrange for the warranty to continue to cover the new television.”