Q:We are looking at buying a new TV for the family this Christmas and are trying to decide if we should spend the extra money on an extended warranty. Is it really worth it?

A:Like a lot of things in life, this is not a simple yes-or-no answer. With manufacturer warranties shrinking, you need to decide if it makes sense to pay for additional coverage up front or put some funds aside just in case you have to fix the TV later.

Here are some points to consider before handing over your hard-earned money:

• The value of the item being purchased vs. the cost of the extended warranty: You may find that the warranty on lower-price items could add an extra 20 per cent or more to the purchase price, while the warranty of expensive items may only add 10 per cent.
• Length and terms of the manufacturer's warranty vs an extended warranty. Keep in mind that extended warranties go into effect from the day the purchase is made.
• Whether normal wear and tear, accidental damage or power surges are covered. If you have kids and pets or host wild parties, it's important to know the limitations of the coverage.
• Some credit cards provide no-cost extended warranty coverage on purchases made with the card.

Do your homework before you buy. You may find the TV you're considering is highly rated and you can forego the added expense. However, depending upon the cost of what you are buying, you may have more comfort knowing you're protected.

Don't rely on claims made by a salesperson. Read the fine print and understand what is and isn't covered. Companies offer extended warranties to make a profit -- it's important to understand this before you buy. Extended warranties help a company's bottom line.