CIO — When my iPhone died an unexpected death after about 15 months of use, I held my breath and called Apple. No worries, they said, your extended warranty is still in force. An hour later I was at an Apple store where my new phone was waiting for me and I felt pretty good. After all, my AppleCare policy cost $69; a new phone was about $200, so I came out $140 ahead. Not a bad return on my investment.

It turns out, though, that I was one of the lucky ones. Extended warranties, says Joe Ridout of Consumer Action in San Francisco, generally don't pay off. On average, retailers and manufactures only pay out about 50 cents of every dollar they take in on extended warranties. Which is also a pretty good return on investment—for the vendors.

Are extended warranties always a bad idea? Ridout is quite negative about them. "Sometimes you win the lottery, but that doesn't mean it's a good investment," he told me. "Extended warranties are a very bad investment."

In general, he's right, but there are times when it's a good investment to spend the extra money. Here are some tips that will help you decide, as well as some suggested alternatives to in-store extended warranties pushed by the likes of Radio Shack and Best Buy (BBY).

First, thoroughly check the manufacturer's warranty

Unlike mechanical things, most electronic devices that have a defect will fail pretty quickly, or won't work at all when you try to power them on. Warranties generally cover you for 90 days, plenty long enough for that lemon to show its colors.

Weigh the cost and convenience of potential repairs

It turns out many repairs cost no more than the price of the warranty, according to data from Consumer Reports. Of course, it's getting harder and harder to find a business that will repair consumer electronics, so if you live in an area that doesn't have that kind of service reasonably close by, a warranty might be a reasonable expenditure.

Check the price of the item against the cost of the warranty

I remember buying a set of earbuds for $30 or so at a Radio Shack and being asked if I'd like to spend another $7.50 to protect myself. Ridiculous. That's nearly one dollar in warranty for every $3 of goods.

Shop carefully

There's no excuse for not doing some homework before you buy any piece of hardware. Our sister site, PCWorld, is a great source of information on many types of digital devices from printers to cameras.

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