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: for most products, an extended warranty is a bad bet — you're paying a large markup to insure a loss you could comfortably self-insure.
Why
An extended warranty is just insurance on one appliance. A big share of the price is commission and profit, not expected claims, so the average buyer gets back a fraction of what they pay. Manufacturer warranties and (in many provinces) sale-of-goods/implied-durability laws already cover early failures.
When it might make sense
A genuinely fragile, expensive item where a repair would blow your budget and the specific plan's terms are unusually good. Otherwise, self-insure and put the premium in a repair fund.
Run the expected-value math
Defaults are educational assumptions (or sourced industry framing) — change every field. EV = P(claim) × E[payout] − annual premium.
-$168
Negative = you pay more than you get back in expectation
16.0%
E[payout] $32 / premium
Illustrative industry loss-ratio framing: 20.0% (content constant — not your personal odds).
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.
Educational only — not insurance advice, and no products are sold here. Robert is a mascot, not a licensed advisor. See our disclaimer.