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Getting gadgets for the holidays? A guide to insurance and warranties

With millions of cell phones in circulation and increasing numbers of people using portable computer devices, there are ample opportunities for high-tech gadgets to be stolen, lost or broken.

Depending on what happens to your gadget, it may be covered under a home insurance policy, a standard manufacturer's warranty or an extended warranty that you can purchase. Some gadgets break more often than others, with drops being the most common cause of malfunctions, says Anthony Scarsella, chief gadget officer at Gazelle, a website that buys and sells used electronics.

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smartphoneGlass -- whether part of an iPad, cell phone or other device -- often breaks.

"When the whole entire front surface is glass, or a screen, that's your biggest problem," Scarsella says.

When is a gadget covered by home insurance or a warranty? And when should you buy an extended warranty? Here are some of the basics.

Home insurance

Most homeowners insurance policies cover theft or loss due to a named peril, such as fire, lightning or windstorms, but not a loss from losing the item yourself. A stolen gadget would be covered, whether taken from a car or home. You must pay a deductible when filing a theft or loss claim.

Accidental damage such as dropping an iPad would not be covered, says Mike Coleman, a State Farm agent in Alabama.  A personal articles policy can be added, he says, to cover accidental breakage. The add-on can be inexpensive. Coleman says he recently sold $100 in coverage for $2.20 annually, with no deductible.

Manufacturer's warranty

Most companies back their products for a year, although some warranties are for six months or less, says Steve Abernethy, CEO of SquareTrade, which sells extended warranties. The manufacturer covers mechanical errors, not human errors such as drops or spilled coffee. You won’t be covered if you lose the device or if there is a theft.

If an item breaks because of a mechanical error, it's most likely to happen in the first two years. That's why it's a good idea to purchase extended warranty coverage that protects the device beyond the first year, Abernethy says.

Phones or anything with moving parts -- such as a keyboard that slides -- are more likely to malfunction, Scarsella says. "The more moving parts and the more buttons and parts, the bigger chance that something's going to break on it."

Overheated gaming consoles used for hours without pause also break often. Simpler devices, such as e-book readers, don't break as often, and the BlackBerry has had fewer problems since its trackball was eliminated, Scarsella says.

Extended warranties

An extended warranty offers protection from malfunctions, drops, spills and other accidents. Such warranties typically don't cover loss or theft, however.

Accidents or malfunctions account for 90 percent of problems with electronic gadgets, says Abernethy, whose company sells extended warranties that you can buy within 30 days of purchasing a gadget. Smartphones are the most common source of claims, with the typical smartphone having a 30 percent failure rate over two years, he says. Cell phones break so often that his company charges a $50 deductible, a fee it doesn't require for other products.

Even without drops and spills, the failure rate for most gadgets is 10 percent to 15 percent over the first three years, he says. Extended warranties also can be bought through manufacturers, although it's important to find out if they cover damage from drops.

Without warranties or coverage provided by insurance companies, gadgets can be expensive to replace. Smartphone purchases subsidized by phone companies may cost only $200, but the price soars to $700 without the subsidy, Abernethy says. And buying coverage that costs more than a new device -- or will last longer than the device -- is a bad idea. Most people replace their gadgets every three years, he says.

Getting insurance quotes isn’t the only way to protect your nifty new gadget. After getting a screen protector and case for your iPhone, iPad or other product, keep it away from your kids. Your new toy is an easy way to entertain children, but they may drop it.

"It is amazing how beautiful the iPhone is, [but] how easy it is to break," says Abernethy.

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