Warranty Coverage Gap Estimator
Estimate your potential out-of-pocket exposure when your warranty doesn't fully cover repair or replacement costs.
Formulas Used
1. Repair Cost per Incident
RepairCost = ProductValue × (RepairCostPct / 100)
2. Gross Warranty Payout
GrossPayout = RepairCost × (CoveragePct / 100)
3. Payout After Deductible
PayoutAfterDeductible = max(0, GrossPayout − Deductible)
4. Effective Payout (with cap)
EffectivePayout = min(PayoutAfterDeductible, MaxClaimLimit) [if cap > 0]
5. Gap per Claim
GapPerClaim = max(0, RepairCost − EffectivePayout)
6. Probability of At Least One Failure
P(≥1 failure) = 1 − (1 − AnnualFailureRate)^WarrantyYears
7. Expected Failures (Poisson approximation)
E[failures] = AnnualFailureRate × WarrantyYears
8. Probabilistic Expected Gap
ExpectedGap = E[failures] × GapPerClaim
9. Coverage Efficiency
Efficiency = (EffectivePayout / RepairCost) × 100
Assumptions & References
- Repair cost is expressed as a percentage of original product value; typical consumer electronics repairs range from 30–80% of product value (iFixit Repair Economy Report, 2023).
- Annual failure probability is treated as constant across years (memoryless / exponential failure model).
- The probability of at least one failure uses the complementary binomial formula: 1 − (1 − p)^n.
- Expected failures use a Poisson/linear approximation: p × n, valid when annual failure rates are low (<30%).
- Deductibles are applied per claim, consistent with standard extended warranty contract structures (Consumer Reports Warranty Guide, 2022).
- A maximum claim limit of 0 is interpreted as no cap (unlimited coverage up to the coverage percentage).
- This tool does not account for inflation, depreciation of the product over time, or multi-component failures.
- Coverage efficiency below 50% is classified as High Gap Risk; 50–79% as Moderate; 80%+ as Low.