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When you make a big purchase, it makes sense to want a warranty. Knowing you have a year or two of defense against accidental damage or product defects makes it a lot easier to spend a few hundred (or a few thousand) dollars, right?
In practice, an extended warranty is even better. For big purchases, you might pay a bigger chunk up front, but you end up getting three or four years of warranty coverage. When it averages out to something like $100 a year on an $800 purchase, that makes a lot of sense.
There are some almost suspiciously affordable extended warranties on Amazon, however. For example, you can buy the 40-inch TCL S325 for $200 from Amazon, and get a three or four year extended warranty (or a "Protection Plan") for $4.74 or $9.03, respectively. At those prices, why wouldn't you?
It's true that on paper, it sounds like a great deal. This particular extended warranty comes from Asurion LLC, a company that supplies a range of very affordable extended warranty plans for Amazon products specifically. It's a four-year Protection Plan for TVs from $175 to $199.99.
When you take a closer look at what's covered, the Asurion Protection Plan only claims to cover "failures due to power surge and other mechanical and electrical breakdowns." While this is certainly good coverage to have for four years, it's not the most robust in terms of protections. Anything accidental or water-based, for example, doesn't appear to be checked out. Though, for less than ten dollars, you're getting what you pay for.
The other issue here seems to be reliability. The four-year plan for this TV price range only has 25 reviews, but quite a few report never receiving the coverage, or being unable to have their claim accepted. What's more, there are complaints listed from manufacturers on Amazon itself who claim they have no say in the offering of Asurion (or even SquareTrade/Allstate) protection plans.
Further, most Amazon products can be returned within 30 days, and most manufacturers already provide a standard year of warranty, so this third-party protection plan will realistically only kick in during years two or three of the product's life cycle. However, if your TCL TV—for example—has an electrical or mainboard problem during its third or fourth year of ownership, it's certainly worth paying $9 to have it insured, right?
In some cases, you'll be able to get extended warranties from SquareTrade, a subsidiary of Allstate, and both of whom are definitely more trustworthy (in name) than Asurion, in any case.
These plans are more expensive, of course. The $175-$199.99 electronics plan for three years costs $29 instead of Asurion's $9 for four years, but SquareTrade covers "drops, spills, accidents, liquid damage, plus mechanical and electrical failures during normal use." All in all, they're a more trustworthy and useful deal, even if the chances of something happening three or four years out are technically no riskier.
The very reason you might be reading this article is exactly why offering extended warranties in this manner are so tricky to quantify. For a $200 product, paying $9 for four years of coverage is almost too cheap to even notice. If you have to go with one, I'd go with SquareTrade if possible.
However, the chance that you'll need a protection plan over 1,000 days into product ownership is also extremely unlikely. I guess the answer boils down to: why not? It's probably subsidizing Prime benefits, at least.