Are extended warantees a ripoff?

[Stereophile]

But most of the time the cost of repair is twice the price of the plan. most stores do not make the profit either there is usually a third party administrator for the warranteesp i know staples, bestbuy, office max, sams club. they all have a third party administrator.

But if we accept the premise of repair costing twice that of an extended warranty, there will need to be a 50% failure rate for it to come out even. Anything less, and the party offering insurance comes out ahead. As for third party administrator - yes of course it's a separate company providing the coverage usually, but bestbuy, office max, sams club etc. all get commissions for selling the warranty. From what I've read the profit from selling an extended warranty dwarfs the profit from selling the item at retail. They don't go to the effort of providing extended warranties as a favor to us !