Digital cameras, like smartphones and laptops, are expensive, complex, and fragile pieces of machinery, which is the perfect storm when it comes to the appeal of protection plans. Yet prices are all over the place, and not even protection from drops and spills is universal. The bottom line is it pays to shop around, not only for the actual camera, but also for the protection plan.

For the past few weeks, we've been gathering data in service contract pricing for several popular types of consumer electronics, taking not of not only the retailer and the prices, but also the length of the coverage and which companies administer and underwrite the contracts. This week, we're looking at digital cameras.

The survey began with a shopping expedition for digital cameras at 17 major retail chains: Abt Electronics Inc., Amazon.com Inc., Best Buy Co. Inc., B&H Photo & Electronics Corp., BrandsMart USA, Costco Wholesale Corp., Crutchfield Corp., eBay Inc. (including merchants 6th Ave. Express, BuyDig, Cameta Camera, Focus Camera, Red Tag Camera, and Tristate Camera & Video), Micro Center (Micro Electronics Inc.), Newegg Inc. (including merchants 17th St. Photo Supply, Focus Camera, and Quality Photo), Office Depot Inc., PC Richard & Son, QVC Inc., Sam's Club, Staples Inc., Target Corp., and Wal-Mart Stores Inc.

We were unable to find suitable camera-service contract pairs at both Sears Holdings Corp. and hhgregg (Gregg Appliances Inc.), though there were some digital cameras on their shelves. At a few other electronics retail chains, they didn't want to cover the high-end merchandise, or some of the low-end units, or their product lines were too limited to fit into our pricing model.

Service Contract Administrators

Over the course of going through the digital camera offerings of 17 retailers, we came across seven different obligor/administrator/underwriter teams. SquareTrade was in Abt Electronics, B&H Photo, Costco, Crutchfield, eBay, Office Depot, QVC, Sam's Club, Staples, and Target. Its underwriter at all but eBay was Starr Indemnity & Liability Co. At eBay, however, SquareTrade's underwriter was CNA Warranty Services Inc. Service Net and AIG were at Best Buy and newegg.com. Warrantech, AMT Warranty and AmTrust Financial Services Inc. were at BrandsMart USA. Asurion and CNA Financial Corp. were at Walmart. Micro Center had The Warranty Group. PC Richard had its own in-house service contract operations. And depending upon the camera we looked at, Amazon.com had a competitive mix of plans available from four different teams: Asurion/The Warranty Group, FA Service Plans (the Seagate data recovery service), and SquareTrade/Starr.

To simplify the shopping expedition and reduce the number of variables outside of the length and cost of the service contract, we looked for a limited number of camera brands and models. At the low end of the market, we looked for eight point-and-shoot models, most of which sold for $300 or less. We first looked for any of four Nikon Inc. models: the Coolpix B500, the Coolpix S33, the Coolpix S3700, or the Coolpix S7000. We also looked for the Polaroid POLSP01W, a basic $100 model that was sometimes bundled with a photo printer. And if none of those five models were in stock, we looked for any of three Canon models: the PowerShot SX410, the PowerShot SX530, or the PowerShot SX610.

Further up the food chain, we looked for four digital single-lens reflex cameras selling for anywhere between $300 and $1,000. To keep it simple, we looked only for Canon Inc. products, and only for certain models. In the midrange, we looked for the Canon EOS Rebel T5, the EOS Rebel T5i, the EOS Rebel T6, and the EOS Rebel T6i. And at the high end of the market, we looked for three models: the Canon EOS 6D, EOS 70D, and EOS 80D.

In Figure 1, we've noted the prices of the 346 digital cameras we found. All but a handful of the point-and-shoot units fell into the under $300 category, and all of the high-end DSLR models fell into the over $1,000 category. Most of the midrange models fell into the $300-to-$1,000 range, though there were a few bargains to be found.

For the DSLR models, we tried to shop for packages that included at least one lens. For all models, we shopped only for new units, disregarding open box, no box, used, or refurbished products. And in the price of the products, we did not include shipping or handling, sales tax, or other add-on costs.

Next we noted the price of the service contract offered with the camera. In nine cases, however, there was no service contract offered. This happened at both the low end and at the high end of the market. At the low end, Walmart, hhgregg, and PC Richard sold the Polaroid model without a protection plan. At the high end, Abt Electronics did not offer service contracts for its DSLR units, though it did do so for all of its point-and-shoot models, including some fancy models that sold for up to $900.

For the 337 price pairs that we were able to establish, however, we found that most had durations of two or three years. In Figure 2 we can see that only 30 ran for one year -- essentially enhancing the one-year product warranty with additional coverages such as protection from drops and spills. And only 37 ran for four or five years (32 ran for four years and only five were for five years).

In many cases, the retailers offered multiple service contracts per unit, some with accidental damage coverage, and some without. Sometimes they offered one-, two- and three-year plans on the same camera. And sometimes they offered two- and three-year plans with accidental damage coverage, coupled with three-year plans that offered break/fix-only coverage. Most times the accidental damage coverage began on the date of purchase, while the break/fix coverage began either at the time of purchase, or upon the expiration of the product warranty.

Enhancing Product Warranties

All of the one-year policies were found at either newegg.com or Best Buy. They were typically at the short end of a tiered offering of one-, two-, and three-year protection plans, which enhanced the product warranty by protecting against perils such accidental damage, drops and spills, power surges, and battery replacements.

Prices for the one-year protection plans ranged from $10 to $150, which when compared to the price of the product they protected, turned out to be a range of 2.4% to 19% of the price of the product. The average was 8.4%.

Interestingly, there was little correlation between the most and least expensive products and the most and least expensive protection plans. For instance, at the low end, a Nikon point-and shoot selling for $130 was offered with a $25 one-year service contract, for a ratio of 19%. Another unit selling for $140 had the same-priced protection plan. At the other extreme, a Canon model selling for $2,100 was offered with a $50 plan, for a ratio of 2.4%. Another high-end unit selling for $1,600 had the same-priced protection plan.

Two-Year Service Contracts

The two-year plans were both more numerous and more expensive, which they should be, given that the product warranty has expired after the first year. As can be seen in Figure 4, these two-year plans ranged in price from $9 to $360, and as a percentage of the price of the product they were protecting, from 2.3% to 46%. The average was 16%.

This cohort is where we begin to see the pervasiveness of SquareTrade. The company didn't offer any one-year service contracts, so they're missing from Figure 3. And we found only three four-year offers and no five-year offers from SquareTrade, so they're largely absent from Figure 6 as well. But in the middle of the market, with the two- and three-year durations, roughly half the product-protection pairs we found were from SquareTrade. That doesn't mean they have half the market share, but it does mean that they seem to be all over the landscape.

And once again, there was little correlation between the price of the service contracts and the price of the products they protected. That $9 plan was coupled with a $100 Polaroid camera, and the $360 plan was coupled with a Canon EOS 6D selling for $2,099. So the percentages were 9% and 17%, respectively. But the extremely inexpensive 2.3% plan was associated with a $1,600 camera, and the 46% plan was a $59 two-year service contract for a $127 Nikon camera.

This leads us to question whether there is any consideration of repair or replacement cost in the price of a typical service contract. Do they really build it up from X the typical price of repair and Y the frequency of claims to arrive at Z the cost of coverage? Or do they simply try to underprice the other guy, and hope they can make it up on volume?

For instance, we found six retailers (B&H Photo, Crutchfield, eBay, Office Depot, Staples, and Target) offering the Canon EOS 70D at prices around $1,100. All six offered two-year SquareTrade plans. But those plans were priced from $37 to $230. Granted, the two least expensive plans did not include accidental damage coverage. But the least expensive one that did was priced at $120.

So here we have the identical product, with service contracts of identical durations, and conceivably identical loss costs, unless we begin to assume that one retailer's customers are clumsier than another's, or one repair process has more overhead than another. Yet of the four plans that cover drops, spills, and accidents in addition to defects and malfunctions, the consumer could pay $120 to $230 for essentially the same coverage from the same administrator.

For the Canon EOS 80D, we found five retailers selling the product and a two-year SquareTrade plan. All five covered drops and spills. Yet they ranged in price from $80 to $230, or from 6% to 18% of the product's price. Therefore, we suggest, even with the same product and the same service contract administrator, it pays to shop around and compare not only the camera's price but also the protection plan offered with it.

Three-Year Plans

There are also plenty of SquareTrade offerings mixed in with the three-year plans included in Figure 5. In fact, well over half the 149 product-protection plan pairs in this cohort are from SquareTrade, from any of seven different retailers.

The prices of these service contracts range from $15 to $360 and the relative price as compared to the price of the camera ranges from 2.8% to 54%. The average is 18%.

Amazingly, there are 21 product-protection pairs where the price of the service contract is less than 10% of the price of the product. And only five of them are from SquareTrade. In other words, there are loss leaders all over the market.

At the other extreme, there are 21 product-protection pairs priced over 25% of the camera's price. And only seven are from SquareTrade. So given that well over half the total of 149 are SquareTrade, this under-representation at the extremes is noteworthy.

Four-Year and Five-Year Terms

Finally, we have only 37 product-protection pairs that dare to provide terms of four or five years. Most are Warrantech offers on Amazon.com, but other retailers and administrators willing to take on the longer risks include AIG at newegg.com, Asurion/CNA at Walmart, and PC Richard.

Of the 37 pairs we found, the prices ranged from $26 to $330 and the percentages ranged from 5% to 63%. The average was 20%.

Some of the offers at those extremes were bargains. For instance, Walmart and Asurion/CNA were willing to cover a $2,100 Canon model with accidental damage protection for four years for only $105. And Asurion had plenty of other below-average protection plan prices at both Walmart and Amazon.com. Meanwhile, Warrantech and AmTrust were willing to cover several DSLRs on Amazon.com for under 10% of the product price, including accidental damage protection.

In fact, we found that 30 out of the 37 product-protection price pairs seen at Amazon.com were priced below average. All of the price pairs from Staples were priced below average (though they lacked accidental damage coverage). And all 13 of the pairs seen at Walmart were below average. So there are some retailers that definitely do try to keep service contract prices in the bargain basement.

Expensive Protection Plans?

And again, at the other extreme were lots of expensive service contracts for inexpensive cameras. PC Richard wanted $170 to cover a $450 camera, with no accidental damage protection. AIG wanted $130 to cover a $250 point-and-shoot camera at newegg.com, again without accidental damage protection. Think about the bet the consumer is making: they're betting that they will not drop their camera for four or five years but a defect or malfunction will arise years after the product warranty expires. And they're betting half the price of the camera on this unlikely scenario.

The main conclusion to be drawn is that some of these hundreds of product-protection plan pairings aren't covering their cost, while some are covering them all too well. And as with TVs and Blu-ray players, we strongly suggest that consumers shop around, not only for the product, but also for the protection plans. Besides the price, the presence or absence of accidental damage protection is the main differentiator for the service contract. But even with the same product and the same protection plan administrator, the price can still vary tremendously from one retailer to another.