Are warranties warranted? The best warranty may not be what you think.

Imagine trying to meet a critical deadline using your laptop late at night. In a slothlike state, you accidentally spill coffee on your keyboard. Your best four hours of work go up in a burst of sparks and smoke. Thank goodness you have that warranty--or do you?

Many executives who use portable electronic equipment fear encountering scenarios such as this, but it's possible their fears may be misplaced. Instead of worrying about damaging their equipment, they should guard against spending valuable dollars on a warranty they don't even need. The fact is, purchasing an extended warranty for computers, mobile phones, pagers and other electronic equipment may be a mistake.

According to Jim Gorzelany, senior editor at Consumers Digest, no consumers group recommends buying an extended warranty on any electronics product, especially computers and mobile phones. "Technology changes so rapidly, it wouldn't make sense to lock yourself into an extended contract," says Gorzelany. He points out that most products come with an automatic 30-day to 90-day warranty. It is not advisable to purchase an additional three-year warranty for a computer because it's easy to outgrow it within that time.

Gorzelany also explains, "If you upgrade your computer [going from a 486 CPU to a Pentium CPU, for example], your warranty typically will not be transferable." Self-servicing your unit, such as installing a digital sound card yourself, may also void your warranty. And Gorzelany cautions that many extended warranties won't cover damage you've caused--and isn't that what most people want protection for anyway?

So what's a fumble-fingered executive to do in case of a technological tragedy? First, since most warranties cover only the manufacturer's defects, and not problems caused by accidents or the user, you might consider a service contract. This could be a better solution for very expensive electronic equipment that you use for business.

Typically, with a service contract, someone will visit your home or office to fix an electronic device. With a warranty, you have to send the unit out for servicing. You can expect to pay at least $50 to $150 for a decent one-year service contract, depending upon the product. Be sure to check if the contract covers parts, problems caused by accidents and/or full replacement if something goes wrong.

Second, don't be pressured into buying a warranty. Gorzelany says salespeople make most of their money off the extended warranties they sell. Some of these warranties can be marked up as much as 300% more than their actual cost. So don't fall prey to an insurance industry rip-off.

Instead, some experts advise putting $400 in a passbook bank account for electronic emergencies. At an annual nominal rate of 4% to 5%, you'll get a better return than you would buying a service contract or warranty you might never use. Gorzelany remembers it cost him $400 to fix his two-year-old laptop. By the time it broke down, he could have spent the money for the same model used. Instead he chose to have it fixed. If it costs more than $400 to fix an electronic device, you're probably better off buying a new one anyway.

Take cellular phones, which are inexpensive compared with prices 10 years ago. These days, phenomenal discounts and rebates are available if you sign up for service warranties when you purchase. But these warranties may not cover parts, so if the phone breaks, buying a new one may be less expensive than the cost of a warranty.

The best warranties are those that are free or built into the cost of the equipment. Laurie Levy, CompUSA manager of public relations, says many computer stores such as CompUSA give consumers an automatic three-year warranty with any full-package computer they sell. However, these warranties do not include home or office visits or regular routine maintenance.

Sometimes smaller, higher-end electronics stores provide limited service contracts included in the price of electronics equipment. These contracts may include free delivery, set-up and regular routine maintenance.

Remember, there is going to be an element of risk no matter what you do. Making provisions to repair malfunctioning electronic devices is a necessity for the information age. So shop around, and may the buyer beware!!