I was with a friend from church who was buying some musical equipment for his children. When he got to the place where the cashier made the pitch for the extended warranty plans he said, “Hold on a minute, I want to ask an expert.”  He then walked over to me and said, “Should I take the extended warranty?”  “Of course!” I said. Just kidding.

My friend, a professional accountant, laughed as I explained that I never buy them. He said, “Great! I never do either but just wanted to check and be sure I was not making a big mistake.”

Here’s why they don’t make sense to me.

* First, I am buying a brand new product that comes with a limited-time warranty from manufacturing defects. If the product does not work as expected you can likely return it within the first 30 days without a problem so long as you have not abused the product.

* Second, extended warranties are sold with lots of fine print that typically narrow the liability of the manufacturer. Unless I am willing to take the time to read all the fine print, I have no business paying for a warranty and assuming that it is unlimited the way it sounds while I am standing in the store ready to check out.

* Finally, the issuer of these extended warranties would not offer you the insurance coverage unless the odds were greatly in their favor that you will never use it. They have done the math and know that the probabilities are in their favor, not yours. For these reasons, I always pass.

Now, I am sure there are horror stories of folks who benefited from one of these warranty plans. I am not saying you should never purchase these policies. I am saying do your homework, know what you are paying for, and understand the cost vs. reward before you take the offer.