Real Insurance Is Better than AppleCare

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Recently, my brother-in-law decided to buy a 13 inch Apple Macbook Pro with Retina. He asked me if the AppleCare Protection plan, which costs $249 extra, was worth it. I told him no. For the same amount of money or less, one could get a better protection plan than AppleCare.

broken-mask-robotThe AppleCare Protection plan is a 3 year extended warranty plan. It only covers malfunctioning parts. It does not cover accidental damage, loss, or theft. If you drop the Macbook and the display cracks or the laptop stops working, you are out of luck because AppleCare does not cover that. You will need to pay the full repair price, which could be $1000 or more to replace a retina display. If you spill water on the keyboard and your Macbook shorts out, that’s too bad. If you lose the Macbook or someone steals it from the safety of your house, oh well, that’s the way the cookie crumbles. AppleCare does not cover any of that.

What does AppleCare cover? Well, if your keyboard or display malfunctions through no fault of yours, then Apple will repair or replace that component. The Genius Bar members at your local Apple Store will check the Macbook for damage, such as large dents, that could cause the malfunction. If they find such damage, they can refuse the repair; if you are very lucky, you will get someone nice enough to allow the free repair. Be aware that Apple has put moisture detectors inside the Macbook so that if you spill water on it, the Genius Bar will know and can refuse the repair even if you have AppleCare Protection.

There is a reason why extended warranties are pushed so often by retailers. They make a lot of money off of them. Usually if a product such as a laptop were to fail, it would most likely fail during the first year when the product is still under the standard one year warranty. So if the customer pays for an extra year or two of warranty, that is considered an almost guaranteed 100% profit for the retailer. Not to say that there isn’t any case where a day or two after the one year warranty expired, the product failed and the owner was glad to have paid for extended warranty. That case is the exception though. The odds suggest not buying an extended warranty.

When most people buy AppleCare, I think they believe that they are buying insurance. They aren’t. Insurance could cover repair or replacement due to accidental damage, loss, or theft. AppleCare is not insurance. For the same amount of money, they could get real insurance that provides greater peace of mind.

First, before we talk insurance, make sure that you buy that expensive Macbook with an American Express credit card. (If you don’t have an American Express card, get one. There are basic American Express cards with no annual fee that provide the two benefits below.) Purchasing an item with an American Express card provides the following two benefits for free:

  • Purchase Protection: your purchase is protected for up to 90 days from the date of purchase from accidental damage or theft. You will be reimbursed up to $1000. (If you have an American Express Platinum card or similar, you get protection from loss also and up to $10,000.)
  • Extended Warranty: doubles the warranty on your purchase up to an additional year. For an extra year after the original warranty expires, if the purchase malfunctions through no fault of yours, you will be reimbursed the original cost (up to $10,000).

Purchasing the Macbook with an American Express credit card will add one additional year of extended warranty on top of the standard Apple one year warranty for free. It is a no brainer to do so. American Express service is very friendly. For example, the Wifi feature on my sister’s iPhone 4s broke (due to an Apple hardware defect) after she upgraded to iOS 7. Because it was past the one year warranty, Apple wanted $200 to replace the iPhone. I told my sister to call American Express to see if she was eligible for the free extended warranty. She was. They asked her to send them the receipt and then gave her a credit for the original cost of the iPhone. How cool is that?

Second, before buying insurance for your Macbook, check that you don’t already have it. You may have a rider on your house or rental insurance that covers your personal property such as electronics. Check to see what is covered. For example, my renter’s insurance covers theft and loss of personal property due to fire (burst pipes, etc.). Unfortunately, accidental damage is not covered. In the case of theft or loss, my rental insurance company will reimbursed me for the deprecated cost or if I purchase a replacement, they will cover the original cost. (This is nowhere as nice as American Express’ full credit of the original cost without requiring you to buy a replacement.)

If you don’t have a rider for personal property like electronics, you may want to ask your home insurance company about one. It may be the cheapest option because a rider is considered part of the bundle and you may get a better deal that way. Homeowners on forums provided some examples such as $40/year for $2000 coverage (much less than AppleCare) or $80/year for $5000 coverage for malfunctions, accidental damage, loss, and theft. The insurance cost seems to vary widely (one homeowner mentioned $15/year, another $30/year for $4000 coverage, and a third mentioned a deductible of $50).

Instead of a rider, you can purchase personal property insurance directly. Most likely, standalone insurance will be more expensive than a rider. The most recommended standalone insurance for a Macbook is an Inland Marine Insurance policy (can be gotten from several insurance companies like AllState, State Farm, and Farmers Insurance). Though originally created to cover expensive electronics on boats, the policy applies for land usage also. In a forum post (Best Insurance on Earth for your MacBook / Air etc. Far better than AppleCare), one person mentioned that it costs about $32/year for $1500 coverage of multiple devices with no deductible. (It was mentioned also that the Inland Marine Insurance policy did not cover phones.)

Another insurance mentioned was State Farm’s Personal Articles Policy, which costs $60/year for $3000 coverage. There are also insurance companies, like Safeware, that sell policies specific to high-end equipment and electronics. As with all other types of insurances, make sure to shop around to get the best deal.

When talking about insurance for electronics, Square Trade is a name that often comes up. Square Trade costs about the same as AppleCare; but in addition to the extended warranty, Square Trade covers accidental damage. Because Square Trade does not cover loss or theft, I believe that it is not the best deal. Square Trade is better than AppleCare but you can get better insurance than both for less.

Insurance is personal. I do not purchase extra insurance, such as extended warranties. (I do use an American Express card to take advantage of the free extra year of warranty though.) I am gambling that I’ll be careful enough not to break my Macbook, lose it, or be robbed. Considering all the money I have saved from not buying extra insurance or extended warranties on my many laptops, even if I have to pay full price to replace a Macbook, I will break even or come out ahead. However, if you feel more comfortable having some protection (nothing wrong with that), please consider the alternative options above to AppleCare. You will get much more bang for your buck.

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Send Me Money, Sucker!

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Recently, I got an email from a family member which reads as follow:

From: XXXX@yahoo.com
Subject: Urgent!

Hi,

I'm out of town suffering a terrible incident, I need your urgent favor,
Please email me back as soon as possible.

Thanks.

XXXX
(XXX) XXX-XXXX

The displayed email address looks correct as XXXX@yahoo.com, but when I check the headers, the reply-to address is XXXX@outlook.com. And the phone number has the wrong area code.

I recognized it as the money gram scam. Basically, if you reply to that email, you will receive a request to send money by Western Union (or a similar money transfer service), where it is easy for anyone to go and pick up the cash. (If you call the number, you will probably get voicemail.) The way this scam works is to hack into someone’s email account, send this same message to everyone in the address book, and hope that one or two people will fall for it and send money.

ScroogeMcDuckI sent a warning to my family and wasn’t surprised to find that most did not recognize this email as a scam. They were confused or thought it was a joke. The family member, whose email account was hacked, disclosed that several friends and acquaintances were calling to ask why he needed $930. This tells me that a lot of folks are not knowledgeable about Internet scams. I want to talk about scams, Internet and otherwise, and the one method that I use to fight them.

In the past, this and other frauds were perpetrated by isolated con artists. Nowadays, I believe that most of the scams on the Internet are perpetrated by criminal organizations. If I was a mafia boss, I would definitely have an Internet racket because face it, you can make a ton of money (from the hundreds of millions of victims) with very little risk of getting caught or punished, especially if you are located in another country.

So, there are groups of hundreds of criminals, backed by the best servers that dirty money can buy, running scams across the Internet (and elsewhere). They are working full-time to steal money from you and the companies you do business with. If they are truly International, they may be working full time across multiple time zones, while you are sleeping, eating, going to the bathroom, and watching TV.

You may throw up your hands in defeat at this point. And to be truthful, I agree. There is no way you can beat everything that an organization like that can throw at you. The best you can aspire to be is a potential victim that would take too much effort to defraud. Sad to say, your goal is to be less naive than the masses. Or more simply, the criminals will go for the lowest-hanging fruit and your job is to avoid being the lowest-hanging fruit.

The most powerful tool that we victims have in our arsenal is to “trust but verify” or more accurately, verify before trusting. This applies to almost everything in life. To illustrate, one of my friends did fall for the money gram scam above a couple years ago. After sending the money, she had some doubts so she called the friend up and the friend replied, “What? I’m not in XXXX country, robbed of everything, and in need of money!” My question is: Why didn’t she call up the friend or the friend’s family first before sending money? If she had verified first, the friend or the friend’s family would have told her that the email was a fake.

Email Links: Bad Idea

Avoid clicking on any links in an email, especially an email from your bank. Definitely, do not login if the link takes you to a login page where you are prompted to input your username and password. Instead, open up a browser and manually type in the address of your bank or whatever.

If you’re lucky, clicking on links indiscriminately may get your computer infected with a virus or spyware which will just slow down your computer. If you’re unlucky, a virus will erase your hard drive or a spyware will record what you type, like passwords, and transmit the data to someone who doesn’t have your best interest in mind. Worst, if you click on a link to your bank account and input your username and password, you may have just given access to your bank account to a criminal.

The last is referred to as phishing (pronounced like “fishing” because they are “phishing” for your money) which involves pretending to be a trustworthy entity in order to acquire sensitive information. Basically, someone nefarious creates a website which looks exactly like your bank’s login page. They send you a fake email from your bank with a link. When you click on the link, you are taken to the fake login page. After you input your banking username and password, they could then forward you to the real bank or just throw an error that maintenance is in progress. In the meantime, they have your username and password to access your bank account with.

Phishing may be used to gain access to accounts belonging to other companies than your bank, like investment firms, credit card companies, loan application processors, mortgage payment companies, etc. I believe that all legitimate businesses should make it a policy to not include any links in their official emails; instead, they should ask their users to manually browse to their company websites.

Note: If you receive a complicated link in an email, perhaps pointing to a specific Google or Yahoo photo album, which requires a login and you can’t figure out how to manually browse to it, here’s what you can do:

  1. Browse to the company address by manually typing it in, and log into your account.
  2. Go back to the email and click on the link.

If the link is legitimate, the system will recognize that you are already logged in and bypass the login screen. You would then go directly to that page; that is, the photo album. Doing the above will help you to avoid being tricked by a phishing website.

Phone Calls: Just Hang Up

Similar to the above, if you get a phone call from your bank and are asked to verify your identity, ask what the call is about, say bye-bye, and call your bank’s official phone number (listed on the back of your ATM card, their website, or in the phone book). Calling them directly is the equivalent of manually browsing to the company website. If the “bank” calls you and you provide your verification info (mother’s maiden name, social security, etc.), you may have just given your identity away to thieves, who could then gain access to your accounts or more likely, open a new credit card or loan in your name.

Knowing the above, the perpetrators will attempt to override your caution. A year ago, I got a phone call from my credit card company. They told me that they believed my credit card number had been stolen because they were seeing charges for flowers amounting to over a thousand dollars in Florida. They asked me to verify my identity so they can confirm that the charges were fraudulent. Of course, I answered every question they asked. Afterwards, I realized with horror that I might have just given the keys to my identity away to someone who “called” me on the phone. Thankfully it was a legitimate call, but it could have easily been a trick. What I should have done was ask them what the call was about, hang up, and call the credit card company back directly.

Phishing: Old as the Pharaohs

Phishing isn’t something new on the Internet; it has been around for a long time. I’m sure it has been around since mankind first discovered how to cheat and steal. I think all effective scams involve the use of phishing (again, pretending to be a trustworthy entity) because no one hands their money to some entity they don’t trust.

For example, suppose that you are on a business trip. You arrive late at the hotel. You’re hungry but too tired to go out. Conveniently, there is a flyer for pizza delivery that someone slipped under the hotel room’s door. You dial up the pizza place, make an order, and pay with your credit card. An hour later, the pizza hasn’t arrived yet. You call back and get some lame excuse like the oven has exploded, sorry, but there won’t be pizza for anyone. Or maybe no one picks up. Congratulations, you’ve just had your credit card number stolen.

Remember what P.T. Barnum supposedly said, “There’s a sucker born every minute.” Try not to be that sucker. But if you fall for a scam (which I must embarrassingly admit to once or twice), forgive yourself. You are only human. Just repeat to yourself, “There’s a human born every minute.” (To be exact, there’s a human born every 8 seconds.)

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