Definition from Nolo’s Plain-English Law Dictionary
Warranty coverage on an item that kicks in after the warranty coverage provided by the manufacturer or seller expires. Many consumers are encouraged to buy extended warranties (also called service contracts) when they buy cars or appliances. In the case of appliances and electronic equipment, extended warranties are all profit for the seller and not much benefit to the buyer because only a small percentage of these goods ever break down during an extended warranty period. An extended warranty may make sense, however, if you are buying a brand new model in the first few months after it has been manufactured.