Sorry to say it, but if you buy an extended warranty on anything you're wasting your money. The whole 'extended warranty' business is how retailers make their money, but are a complete scam. Hardly anything goes wrong these days, and the price of the extended warranty is far far higher than the risk of it going wrong.
It can work, though. Some retailers do it properly.
I have had use for it for a printer and a portable CD player. The extra warranty was about +10% of the product price, and they said it covered "anything, including kids dropping it on the floor or you spilling coffee on it".
Unsurprisingly, the CD player lid stopped working because the kids managed to knock it off a shelf. I took it back to the outlet and got a new one with no paperwork or questions asked.
A few months later the printer broke down because my hamster defecated severely into the paper feeder mechanism. This, too, was replaced with no cost to me.
Or I could think of it as gambling that enough other people either 1) are lucky, 2) don't bother with the return ("I don't really need it/want another.") or 3) forget about the return.
But, I don't think of it in terms of how much money I "save" by breaking stuff.
I pay the extra cost and try to be careful. What I get back is Less Worry. If the thingy breaks down, I get a new thingy. That's worth money to me.
The alternative is to handle the risk myself, and saving the 10%s into a "surprise expense account" to use when things break down. I'm convinced I don't have the discipline for that - both managing it and not using the money for other expenses.
A recent survey found that something ridiculous like 0.5% of TVs break down within 5 years. Yet people are paying out a lot of money for extended warranties on them.
It's a matter of cost vs hassle as you say though I guess. For me, if I have 10 electronic gadgets and one blows up, it's not really a big deal, because I can buy a new one with the money I saved by not having extended warranties on all 10 items.
Like any insurance, it's a numbers game - homo economicus will gladly pay an extra 10% for extended warranty if they believe there's a >10% chance it will require replacing in that time.
Of course, those selling the insurance know the numbers best so it generally works to their advantage, which (in association with consumers who lose / forget their warranties) is a big revenue boon to retailers, as you note.
Recognising when you are an edge case helps - I always buy extended warranties on microwaves, because I'm a once-a-month-cooker who therefore uses the microwave a LOT more than the average consumer, and that bet has paid off for me several times now.
Sears appliances and extended warranties actually seem like a good deal. I've certainly come out ahead fairly consistently on them, and the service is excellent.
I actually think it is one of the rare cases where the extended warranty may be a loss leader. I only by major appliances from Sears due to their service, and tell my family to do the same.
In fact, I once thought I hadn't renewed a warranty on my fridge, when it went bad. After the repair guy was done fixing it and gave me my quote, I handed him my credit card to pay for it. After 30s he hands it back and says, "You have almost a year left on warranty." I had gotten the years mixed up.
