Is an extended warranty worth it? One division decides
Fix It or Not, AI-assisted writing · · updated
At the till the question comes fast: add three years of cover for $100? It sounds like insurance against a costly breakdown. The arithmetic says otherwise for most buyers, and it takes one division to see why.
The one division that decides it
Divide the plan's price by what one repair would cost. That is the chance of a covered breakdown at which the plan breaks even [1]. Most retailers charge about $100 for three years of cover on a major appliance, and the average repair visit for washers, dryers and refrigerators costs less than $200 [2]. So a plan is worth buying only if a breakdown in the covered years is more likely than not [1].
| Chance of a covered repair | Expected repairs paid [1] | Net for the buyer [1] |
|---|---|---|
| 10% | $20 | −$80 |
| 20% | $40 | −$60 |
| 30% | $60 | −$40 |
| 50% | $100 | $0 |
Counted another way: suppose 100 buyers each pay $100 and one in five needs a $200 repair. They pay $10,000 and get $4,000 of repairs back [1].
What the sellers' own numbers say
The industry's accounts point the same way. Assurant, a large warranty provider, reported about $9 billion of extended-warranty revenue in 2024 and $1.7 billion paid as policyholder benefits [2]. That is 18.9 cents of every dollar going back to buyers [1]. Analysts put the share paid out in claims at under 20 cents per dollar [2], and retailers selling third-party plans typically keep 40 to 60 percent of the price as commission [2]. The rest pays for selling and administering the plan, and the seller's profit.
The first year is usually covered by the maker's warranty already, so a three-year plan really buys the second and third years, after the early failures that the maker's warranty already covers [2].
Nerd corner
The plan's expected value for the buyer is chance × repair − price [1]. It is positive only when chance > price ÷ repair. Insurance is still worth buying when a loss would hurt more than its average cost suggests, as with a house fire. A $200 repair is not that kind of loss for most households. Put the $100 aside instead: at a 20% chance of a $200 repair, the expected repair bill is $40, so the fund comes out ahead on average [1].
Check yourself
A $150 plan on a machine whose repairs cost about $300: what is the break-even chance? 50%, since $150 ÷ $300 = 0.5 [1].
Why does the first year rarely matter? The maker's own warranty usually covers it already [2].
What should you check before buying any plan? Whether your credit card already extends the maker's warranty, and what the contract excludes [2].
General information, not financial advice. A notebook entry for fixitornot.com, written with AI and checked by hand. Every computed figure is worked out from the quoted prices and the warranty provider's own reported revenue and claims.
Sources
- Our own calculation (2026-10-30): break-even chance and expected value of a $100 plan against $200 repairs; Assurant payout share from its reported figures
- Consumers' Checkbook: should you buy extended warranties (updated 2026)
*Corrected 2026-10-30: The fund comes out ahead because the expected repair bill (a 20% chance of 200) is 40; the plan's second and third years come after the early failures the maker already covers; and the price also pays the seller's profit.*