You know when you’re buying those 300 dollar stereos and the salesman tries to sell you a 50 dollar service agreement–so if it breaks they will fix or replace it? Have you ever purchased the offer before?
What do you think are the realistic chances that your 300 dollar stereo will break? If you’re paying 300 dollars, you’d better hope they will work up to three years. If they’re not, you should question why you’re even paying 300 dollars for the thing; but if they are, you have no need for the service.
Retailers (and lots of other businesses) make a significant portion of their profits from these agreements. These are easy on them (comparatively few people will actually require a full replacement or repair, and even fewer will actually take the time to go through customer service) and extremely high-margin.
So unless you’re extremely risk averse (if you’d take 10 bucks over the equal chance of losing 10 and getting 100), avoid these scams because otherwise, you lose if the product fails, and if the product doesn’t.