Are extended appliance warranties worth it?
Sometimes, but the contract only adds value if it covers meaningful risks beyond the included warranty at a price that beats the repair risk you are transferring.
Key points
What the manufacturer warranty already covers
Contract price + deductibles/fees versus plausible repair cost
Not every failure, part or service event is covered
Warranty and service contract are different
A manufacturer warranty generally comes with the product. An extended warranty or service contract costs extra and can have a different provider, coverage period and claims process.
The expected-value question
A service contract is attractive when the cost of coverage is reasonable relative to the probability and cost of a covered failure. But consumers also value predictability, so a contract can have value even when its average financial return is not positive.
Overlap can erase value
Credit cards, retailer benefits, home warranties or manufacturer promotions can overlap with a service contract. Paying twice for similar protection reduces the value of the second layer.
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