it has to be a bad idea because the companies have to make a profit plus cover overhead. So the payout, on average, can't be the equivalent of the amount you pay them.
A summary of the arguments pro and con I've heard is
here .
Most important, read the actual contract carefully several times before you buy...not the sales literature. Know what it covers and what it doesn't because insurance companies have every incentive to deny your claim and are experts at wording things so they aren't what they appear.
And read up on the financial stability of the company that is actually backing the warranty. So many are shell companies that make money, pay the scamster owner a lot, then go out of business only to reappear under another name with the same business tactics.
And then, if you can't afford to take the risk (either financially or emotionally) buy the best from the best.