Another thing to note is that the price of such extended warranties is not always fixed. We recently bit the bullet and got a large screen HD-TV. Naturally, we were offered the extended warranty by the salesman, which we turned down. When we were paying for the TV, the cashier noted that we didn't have the extended warranty on the purchase order, and asked us if we wanted to get it. However, the price she quoted us was about 1/3rd less than the first quote.

I work tech support for a computer manufacturer, and while I might not suggest a store warranty with desktop computers, I do think that laptop users should at least think about it. My employer charges $600+ to repair a cracked screen and if you live in a house with rambunctious children or pets, paying for the warranty may be less expensive than fixing a dropped laptop.

I think in reality it depends on WHAT you are buying. For example, I recently purchased a front loading washer/dryer from Sears and took them up on a 5 year protection plan for $298.00. I receive annual maintenance for free, and in the third year there was a seal rupture and water all over the place. I forgot I had the protection agreement and local repairers gave me quotes of $300+ to fix it. I remembered my agreement and had it fixed for free.

Now, would I buy one on a microwave? No. Will I update it when this one expires? Depends on the cost of the extension. But what I do think is you should READ AND REALLY UNDERSTAND what you are buying BEFORE you buy it.

I'd just like to say that after my 5th PS2 broke, I will always buy warranties on Sony game systems.

For what it's worth, count me in the always-buy-applecare-for-your-laptop category. I've owned about 8 Apple laptops, and the applecare was more than paid for by the 4 motherboard replacements one of my iBooks required (would have cost $3200 otherwise!) In fact, every one of my apple laptops has required major repairs within the Applecare period (4 different iBooks needed at least 1 motherboard replacement each.) As a long-time network admin at a Mac-based office, I wouldn't buy it for an Apple desktop, but a laptop? Absolutely, definitely, you bet, without a shadow of a doubt. Every time.

I think there are a few things that you have failed to mention but I understand because its not really possible to cover everything in a short artical like this.
Dave you compaired Electronics stores to Casinos. Unfortunatly I think the comparison is quite skued. Casions make %100 of their revenue on "the gamble". In fact they tend to give stuff away for free to those who gamble more. They call these "comps". you also compaired them to insurance companies (who ONLY sell insurance) How is that in anyway the same? You noted that in December 2007 service plans made up for 2% of total domestic sales. I think this point acctualy hurts your argument. 2% is not much. I do not argue that companies make money on them. That is what companies do . . . Make money. If you compaire the amount you pay for home owners insurance to the value of your home you will end up paying well more than half of the value of your home in insurance.
Keep in mind also that many service plans also cover tech support. I know Circuit City does not offer an "extended warranty" like some other places. They offer SO much more than other companies do. I have litteraly saved thousands and thousandes of dollers on products that I have bought at Circuit City. I have heard people complain about having to send it in for so long but would you rather be having to pay another $1000 for a new laptop instead? It makes sense to get it on most stuff. Some things may not be worth the extra cost but they have priced the plans accordingly.

((as a side note to the first comment from Ken B. The reason you were quoted two different prices is likely because there were two different term lenths availible. The sales person may have offered you a 4 year plan where as the cashier offered you the two year plan. The plans are fixed amounts per product and are generally based on the cost to fix the item.))

One main reason that a consumer should buy an extended service agreement is for "Red Carpet Treatment". Consumer Reports says that more than 4 out of 10 laptops and more than 3 out of 10 desktops will need service within the firt 3 years! For laptops, the cost of ONE repair is $100 to $400. When you DO have to get something fixed it's nice to NOT have to pay for it and get great service at the same time! Customers with extended coverage get MUCH better service than those without.