Are extended warranties worth it?
Extended warranties are sold at the till, under time pressure, at the moment you have just spent a lot of money and feel exposed. That is not an accident. They are among the highest-margin products in retail, which tells you most of what you need to know about how often they pay out.
That said, "usually a bad deal" is not "always a bad deal." Here is how to tell.
Start with what you already have
Before considering any extra coverage, count up the protection you have already paid for — which is usually more than people realise.
- The manufacturer's warranty. Typically one year, often two or more on major appliances, and sometimes five to ten years on specific components like compressors, sealed systems and heat exchangers. An extended warranty frequently overlaps this entirely for its first year or two, which means you are paying for cover you already have.
- Your credit card. Many cards extend the manufacturer's warranty automatically, often by a year, when you pay with the card. A large number of people buy an extended warranty on a card that would have given them the same thing free.
- Consumer protection law. Goods must generally be of acceptable quality and last a reasonable time. That protection exists independently of any warranty and cannot be signed away.
- Home or contents insurance. Sometimes covers accidental damage on certain categories.
The maths that usually kills the deal
Compare three numbers: the cost of the plan, the cost of the repair it would cover, and the likelihood of needing it during the extra years.
A common shape: a $150 plan on a $600 appliance, covering years two and three. Failures in years two and three are relatively uncommon — most electronics fail either early (covered by the standard warranty) or late (after the plan has expired). And a repair might cost $200. You are paying $150 for a modest chance of saving $200, in a narrow window.
The general rule: if you could comfortably absorb the cost of replacing the item outright, self-insure. Across a lifetime of purchases you will come out ahead, because the seller's price includes their profit and their administration.
When it can be worth it
The exceptions share a pattern — high repair cost, high failure rate, or genuine inability to absorb the loss.
- Expensive to repair, cheap to buy the plan. Large appliances with sealed systems, where a single call-out plus parts approaches the price of a new unit.
- Things that get dropped. Phones and laptops, where accidental damage cover is included. This is the real value — it covers the thing that actually happens, which a standard warranty never does.
- Known-unreliable models. If the specific model has a documented failure pattern, the odds shift.
- You genuinely could not replace it. If a failed fridge would be a crisis rather than an inconvenience, buying certainty is a legitimate choice even when the expected value is negative. That is what insurance is for.
- Heavy commercial-grade use of a domestic product.
Questions to ask before agreeing
- When does it actually start? If it runs concurrently with the manufacturer's warranty rather than after it, you are buying less than advertised.
- Who administers it — the manufacturer, the retailer, or a third party? Third-party plans are the ones people struggle to claim on.
- Repair or replace? And if replace, at what value — current retail, or depreciated?
- What is excluded? Wear items, screens, batteries and accidental damage are commonly excluded unless specifically named.
- Is there a deductible or call-out fee?
- Is it transferable if you sell the item or move house?
- Can I buy it later? Often yes, any time before the standard warranty expires — which removes all the pressure from the decision at the till.
That last question is the most useful one on the list. "I'll think about it and come back" is almost always available, and almost never mentioned.
The trap nobody talks about
The most expensive mistake is not buying a bad extended warranty. It is failing to use the coverage you already had — paying for a repair on an appliance that was still inside its manufacturer's warranty, because the receipt was gone and nobody remembered when it was bought.
That happens constantly, and it costs more in aggregate than any warranty decision made at a till. Recording the purchase date and warranty length when you buy something, with a photo of the receipt attached, eliminates it entirely — and it costs nothing.
Related: what counts as proof of purchase and how long appliances typically last.
Keepit remembers this so you don't have to
Track what you already have. Most people buy coverage they were entitled to for free, because nobody wrote the manufacturer's warranty date down.
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