Are extended warranties worth it?

For most products, no. The price is mostly commission and profit, the manufacturer warranty and consumer-protection laws already cover early failures, and the loss you're insuring is one you could absorb. Self-insuring wins on average.

Does my credit card extend warranties?

Many cards automatically extend the manufacturer's warranty (often by up to a year) and add purchase protection when you pay with the card. Check your card's benefit guide before buying a store plan.

What is the legal warranty in Quebec?

Under Quebec's Consumer Protection Act, goods must be durable in normal use for a reasonable time — a built-in, free protection that often makes a paid extended warranty redundant.

When should I buy the protection plan?

Only for a fragile, expensive item where a repair would genuinely hurt your finances and the plan's terms (low deductible, accidental damage, easy claims) are unusually good.

How do I self-insure instead?

Set aside what you'd have spent on warranties into a small repair fund. Over many purchases it covers the rare failure and you keep the seller's margin.

Extended warranties: the math says skip most of them

For most products, an extended warranty is a bad bet — a large markup to insure a loss you could comfortably self-insure.

The verdict up front

An extended warranty is just insurance on one appliance or gadget — and priced like a product that has to fund a sales commission. Run the expected-value math (use the calculator below) and it's negative for most purchases: the premium is far more than the failure probability times the repair cost. You're paying for peace of mind at a steep markup.

Why the math rarely works

Insurance is only worth buying when the loss would be financially catastrophic relative to your resources. A $180 warranty on a $900 appliance doesn't clear that bar — if it dies, you can replace it. The retailer knows most items won't fail within the warranty window, and prices the plan to profit on that. The loss ratio — claims paid divided by premiums collected — on retail extended warranties is notoriously low, which is another way of saying buyers lose on average.

You may already be covered

Manufacturer warranty — covers defects and early failures for a defined period.
Provincial sale-of-goods / consumer-protection law — in many provinces, goods carry an implied warranty of durability, so a product that fails unreasonably early may be the seller's problem regardless of any paid plan.
Quebec's legal warranty is the strongest: under the Consumer Protection Act, goods must be durable in normal use for a reasonable time — a free, built-in protection that often makes the paid warranty redundant.
Credit-card purchase protection — many cards extend the manufacturer's warranty automatically when you pay with the card.

When it might actually make sense

A genuinely fragile, expensive item where a single repair would blow your budget.
A plan with unusually good terms — low or no deductible, accidental damage included, easy claims.
A product with a known reliability problem out of proportion to its price.

Outside those cases, self-insure.

Do this instead

Skip the plan and put the premium in a repair fund. Across all the warranties you'd otherwise buy, the money you keep will comfortably cover the occasional repair — that's literally how the warranty seller profits, except you keep the margin. Model the trade-off with the Deductible Optimizer, which uses the same self-insurance logic.

Run the expected-value math

Defaults are educational assumptions (or sourced industry framing) — change every field. EV = P(claim) × E[payout] − annual premium.

Annual premium

Chance of a claim this year

Expected payout if you claim

Buyer expected value

-$168

Negative = you pay more than you get back in expectation

Implied recovery of premium

16.0%

E[payout] $32 / premium

Illustrative industry loss-ratio framing: 20.0% (content constant — not your personal odds).

Robert says: under these assumptions, expected value is about −$168/yr (you pay more than you get back in expectation). Change the odds if you have better data.

Robert noticed…

Every parameter is editable. Defaults on teardown pages are sourced or marked ASSUMPTION in content — never treat them as personal odds.
Implied expected recovery is under 40% of premium — common for add-on products with low claim rates and high loading.

Frequently asked questions

Are extended warranties worth it?: For most products, no. The price is mostly commission and profit, the manufacturer warranty and consumer-protection laws already cover early failures, and the loss you're insuring is one you could absorb. Self-insuring wins on average.
Does my credit card extend warranties?: Many cards automatically extend the manufacturer's warranty (often by up to a year) and add purchase protection when you pay with the card. Check your card's benefit guide before buying a store plan.
What is the legal warranty in Quebec?: Under Quebec's Consumer Protection Act, goods must be durable in normal use for a reasonable time — a built-in, free protection that often makes a paid extended warranty redundant.
When should I buy the protection plan?: Only for a fragile, expensive item where a repair would genuinely hurt your finances and the plan's terms (low deductible, accidental damage, easy claims) are unusually good.
How do I self-insure instead?: Set aside what you'd have spent on warranties into a small repair fund. Over many purchases it covers the rare failure and you keep the seller's margin.

Sources

Educational only — not financial advice. Run your own numbers with the calculator below.

Educational only — not insurance advice, and no products are sold here. Robert is a mascot, not a licensed advisor. See our disclaimer.

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