I have probably spent over a thousand dollars on extended warranties in my life. Every single time, I could have just put that money in a savings account and used it to repair or replace whatever broke — and I would have come out ahead. Here is the math.

Skip the Warranty On These

• Phones and laptops: The manufacturer warranty already covers defects for a year. Your credit card often doubles that to two years for free. Extended warranties on electronics are almost pure profit for the store.
• Small appliances under $100: If a $40 toaster breaks in year three, the warranty cost you $15 and the deductible is probably $10. You just paid $25 to maybe get a replacement for a $40 item. Just put $40 aside and buy a new one if it breaks.
• Anything with a low failure rate: TVs, modern washing machines, microwaves. These rarely break. The warranty is priced accordingly — you are paying for the peace of mind, not the expected repair cost.

Actually Consider the Warranty On These

• Refrigerators with ice makers and water dispensers: These are the most repair-prone appliance in your home. The ice maker alone fails on about 20% of units within five years.
• Used cars from a dealership: A powertrain warranty on a used car with 80,000+ miles can pay for itself with one major repair. Get it in writing what is covered.
• Expensive headphones or earbuds: They live in your pockets, get dropped, get sweated on. The failure rate is high and replacements are expensive.

The Better Strategy: Self-Insure

Every time you are offered an extended warranty, take that exact dollar amount and transfer it to a separate savings account. After a year of declining warranties on TVs, phones, and small appliances, you will have a repair fund that covers almost anything that breaks — and if nothing breaks, you keep the money.