The rate is the whole argument
Every service contract decision reduces to one disagreement: the seller thinks failures are more likely than you will be charged for, and you think the opposite, and neither of you has the number. Publishing an average failure rate for a category would not settle it either, because the average of a million machines says nothing about the one in your kitchen and its particular installation, water, voltage and household.
So the useful move is to stop guessing the rate and read the rate off the price. At the defaults — 180 dollars, three years, a 50 dollar deductible, a 340 dollar repair and 80 percent of failures covered — each claim is worth 290 dollars to you, the contract needs 0.621 claims to cover its price, and with 2.4 covered years in the term that works out at 0.259 failures a year. One failure every 3.9 years.
Now the question is answerable. Is this machine going to need a 340 dollar repair more often than once every four years? Most people have an opinion about that, and it is a much better question than what a failure rate is.
Reading the defaults
At an assumed 0.25 failures a year the expected spend without the contract is 204 dollars and with it 210, so the contract is six dollars behind — which is what you would expect, because 0.25 sits just under the 0.259 break-even. That closeness is not an accident of the numbers chosen here; contracts are generally priced near the point where a plausible-sounding rate makes them roughly line ball, and the margin comes from the difference between the rate people imagine and the rate the seller has actually observed.
The other way to read the same thing: at 0.25 failures a year, the repair would have to cost 350 dollars rather than 340 for the contract to break even. Ten dollars of repair cost flips it. Anyone presenting a service contract decision as obvious in either direction has not done this arithmetic.
Two numbers that quietly wreck a contract
The deductible does more damage than its size suggests, because it comes off every claim rather than off the price once. Raise it from 50 to 150 and each claim is worth 190 instead of 290, the break-even rate goes from 0.259 to 0.395 a year, and the contract now needs a failure every two and a half years to pay.
The covered share does the same job from the other direction. Drop it from 80 percent to 50 and the break-even rate rises to 0.414. That field is not a fudge factor: it is your reading of the exclusions page, and the exclusions page is where most of the disagreement between buyers and sellers actually lives.
When the average is the wrong test
Expected value assumes you can absorb the bad outcome. If an unexpected 340 dollars would go on a credit card and sit there, the smoothing a contract provides has a value that this page does not price, and being six dollars behind on average is a reasonable trade for not being 340 dollars behind on a Tuesday. If the money would come out of savings without drama, the average is the right test and the contract is being sold at a small loss to you by design.
What the arithmetic cannot see at all is the claims experience: how long the appliance sits unusable while a claim is processed, whether the settlement is a repair or a credit, and which exclusion turns up when it matters. Those are read off the contract document, not calculated.
Questions people ask
Are extended warranties on appliances worth it?
That depends on a failure rate nobody publishes, which is why this page asks you for yours and then prints the rate the contract needs. At the defaults the contract needs a covered failure every 3.9 years to break even. If you think this machine will need a 340 dollar repair more often than that, the arithmetic favours it; if less often, it does not. The page does not answer for you because the input it would need is a belief.
What does the deductible do to the maths?
More than people expect, because it applies to every claim rather than once. With a 340 dollar repair, a 50 dollar deductible leaves each claim worth 290 to you and needs 0.259 failures a year to break even. A 150 dollar deductible leaves 190 per claim and needs 0.395 a year — a failure every two and a half years instead of every four.
What is the break-even failure rate actually telling me?
It is the failure rate at which the contract price exactly equals what the claims would have paid you. Above it the contract comes out ahead on average, below it you do. It is more useful than the expected-cost figure because it converts an abstract price into a concrete question about your appliance: will this break more often than once every N years.
Should I count the manufacturer period in the term?
Only the years the contract genuinely adds. A three-year contract sold alongside a one-year manufacturer period is often two years of new coverage, not three, and entering three inflates the covered failures and makes the contract look better than it is. Read the start date off the contract document and enter the difference.
Why does the page keep saying this is an expected value?
Because your appliance will have zero failures or one, never the 0.6 the arithmetic works with. Expected value is the right test if you can absorb a surprise bill and the wrong test if you cannot. When the reason you are considering a contract is that a sudden 340 dollars would be genuinely hard to find, you are buying smoothing rather than a better average, and being slightly behind on average is the price of that.