Extended warranties are one of the highest-margin products in consumer retail. Best Buy, Costco, and every home improvement store makes more profit on the warranty than on most of the products they sell. The margin on extended warranties is 60 to 70 percent — meaning for every $100 you spend on coverage, $60 to $70 is pure profit for the seller. You're not buying protection. You're buying someone's retirement fund.
1 · How the warranty industry works
Extended warranties work on the same math as insurance: most people don't claim, so the small percentage who do can be paid from the pool of people who paid and never used it. The problem is that the terms are designed to minimize claims. Read the fine print on any extended warranty: there are exclusions for "normal wear," exclusions that require original receipts, claim windows that require you to report within 30 days of failure, and service requirements that often send the product to a depot rather than replacing it. The friction is intentional.
For consumer electronics specifically — routers, cameras, smart home devices — the failure rate in years two and three is low enough that the warranty math almost never works in the consumer's favor. Most equipment either fails in the first 90 days (covered by the manufacturer warranty) or lasts five-plus years.
2 · What I do instead
I don't offer extended warranties. I don't mark up manufacturer warranties. And when a client asks what to do if something breaks after the manufacturer coverage expires, I tell them the honest answer: call me, tell me what broke, and we'll figure out whether it's worth fixing or replacing. That's a service relationship, not a financial product.
The equipment I install is selected partly on the basis of brand support history. I don't install products from companies that have poor warranty service or short support windows. That's a better form of protection than any extended coverage plan.
3 · The letter I send
After every install, I send the client a plain-text email with four things: the complete list of equipment installed, the serial number of every device, the manufacturer warranty expiration date for each item, and three specific steps to take if something fails. Not a brochure. Not a upsell. A reference document they can find in their inbox two years from now when something stops working at 11 PM.
That email has saved clients hours of support calls and helped me diagnose problems remotely without a visit. It's more valuable than any warranty I could sell them — and it costs me about five minutes to write because I keep a template. The five minutes is worth it every time.