Worked examples / Protection

Extended warranty

A 3-year warranty on a $600 TV. About 1 TV in 12 needs a repair in that time, and a repair runs about $250.

Skip it

You could cover this yourself, and on average it costs you $59 more than it returns.

You pay$79for certain

You get back$20on average: 8% of $250

For every $1 you pay, you get back $0.25 on average.
The price would be fair if the chance were 32%. You put 8%.
A $250 bill is within the $1,000 you said you could handle.

Put in your own numbers

This is a worked example with illustrative figures, not data about any real person or company. Change any of them in the calculator and the answer changes with them.

How this answer was worked out

You pay	$79
Chance x payout	8% x $250 = $20
Back per $1 paid	$0.25
Break-even chance	$79 / $250 = 32%
Costs more than it returns by	$59

Every formula is written out on the formulas page.

What the calculator asks you

Price of the warranty
Chance it breaks in that time
Cost of the repair or replacement
A surprise bill you could handle

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How this answer was worked out

What the calculator asks you

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