When looking for extended service plans on your company’s equipment purchases, there’s one question to ask: How much insurance is too much insurance?
You don’t want employees simply signing up for every full-coverage, extended protection offer.
At the same time, if an expensive or critical piece of equipment goes down, you know it can cost you a lot more if you aren’t covered.
So what’s the best middle ground? A little legwork and some smart questions can help you figure out your organization’s threshold for risk here.
You probably don’t want to shun service contracts altogether. Too much of a gamble. But when it’s a matter of limited or full coverage, here’s what you want to do.
For mission-critical pieces of equipment and systems, consider contacting your suppliers to find out just how much certain parts would cost your business to replace.
A quick comparison between the replacement costs (including labor) vs. the coverage costs can let you know which is the right route to go.
Sometimes it’ll be better to go with limited coverage -– even for your biggest capital purchases.
A $10,000 replacement cost for a particular component may seem too rich for your blood. But remind managers that a full extended-service contract on particularly intricate equipment can run companies upwards of $15,000 for a 3-year period.
It may take a little time before people get in the habit of doing their homework before checking the soup-to-nuts service coverage. But once they do, you stand to rack up some serious savings, while still staying protected.