Extended warranties are very controversial. If the base warranty is one year, you have to consider that after the year is finished, if something in the set fails, you will have to pay for the servicing.
Most of the failures are a capacitor, or a semiconductor. In these sets the are not usually serviced at the component level. They change complete circuit boards. Repairs can be fairly expensive. If the panel itself, or one of the major circuit boards fail, then the repair can cost about the same as the replacement cost of the set.
The extended warranty is like an insurance policy, where the vendor of the warranty will take on the responsibility to service your set in the case if it fails within the agreed contract time frame. He is also counting on the fact that statistically a certain number of sets will come back for service during the time that he is responsible for the warranty service cost. The price of the warranty is calculated relation to the value of the set, and is determined by a number of factors to determine the probabilities if the set will come back, and the number of times it may fail.
Another important thing to find out, is if the extended warranty is pro-rated. This means that after the first year, you will pay a portion of the cost according to time that you have had the set. For example, during the first year of the extended warranty, you may not pay anything if the set fails. During the second year of the extended warranty, you may have to pay
30% of the repair cost. During the second year, you may have to pay 60% of the repair.
It is important that you understand all the terms of the warranty, and what their liability is with your set. You may have a type of failure that may not be covered.
Some years ago, I remember seeing some CRT sets that had an extended warranty option. They covered the CRT itself for only 2 years. The rest of the set was pro-rated for 3 years. They called it an extended warranty. Basically, during the last year the CRT was not covered. You can bet that after the second year, there were some CRT's that were failing! When the customers complained, they were shown a copy of the fine print on the back of the warranty plan.
For the flat panel TV sets, the prices have been dropping. I have no idea of how far they will go down. You have to use your own judgment with extended warranties. When buying a TV set, first find out if the model or similar models under the same manufacture have been proven to be reliable. It there is at least an 90% reliability factor that is in your favour, it may be worth gambling on having no extended warranty. You can put that cost difference for a good DVD player, or for the next TV set.