"Do you want an extended warranty with that?"

The short answer is no.

It might seem like a good idea when you just blew a stack of cash on a new phone or laptop. Add-on warranty providers know we're attached to our gadgets. Who am I kidding? Breaking a phone is like losing a dear friend.

But here's the cold reality: Most extended warranties like AppleCare, or those from Asurion and SquareTrade, for broken, lost or stolen electronics are a bad deal. And in some cases, they're a downright rip-off.

Insurance makes sense on the big things in life, like your house or your health. The cost of fixing either can be astronomical. But the pain of repairing consumer electronics—even pricey ones like a laptop—is still relatively limited.

Extended gadget warranties are only worth it for niche cases, like people with an extremely advanced case of klutziness. Programs like AppleCare can also be helpful to those who need always-on-call phone tech support, beyond the great free service Apple AAPL 1.30% offers.

Yet for most of us, here's a better plan from Richard Thaler, a renowned economist at the University of Chicago Booth School of Business: "Every time someone offers to sell you insurance on a non-large purchase say no, and take that money and put it into a rainy-day account. With any luck, there will be plenty of money in that account the next time you drop your iPhone."

Or, take the money and buy yourself a nice protective case.

An Apple spokesman says AppleCare programs deliver "exceptional value by giving our customers access to unmatched tech support wherever they need it, extending coverage for hardware repairs and protecting against the most common types of accidental damage."

Apple says AppleCare not only extends customer warranties, it also provides more comprehensive service and support.

Behavioral economists like Prof. Thaler say add-on warranties only seem like a good idea because it's hard to do the right mental accounting. When a purchase brings us joy, we naturally worry about the cost of a repair or replacement, research shows. But underwriters focus on a different stat: the likelihood that something will actually go wrong.

The warranty companies have those numbers, and make an art out of charging enough for their plans that they still make a killing. It's hard for us to figure out the chances of an incident, but in general, gadgets are getting more reliable, not less.

If you have experience tinkering with electronics, one option is to buy a replacement screen and fix an iPhone yourself. Photo: Emily Prapuolenis/The Wall Street Journal

A few data points nod to the risks. Smartphones that live in back pockets and sweaty palms are perhaps more vulnerable to accidental destruction than TVs and laptops. A repair firm called iCracked that offers a warranty program told me that 20% of customers with an iPhone 6 crack the screen within a year of buying. SquareTrade, another warranty firm, says a third of its mobile phone customers file a claim at some point. A good case would likely reduce your risk, but I've not seen any data on the subject.

Consumer Reports, which generally recommends avoiding extended warranties, says only 15% of buyers got a new phone because the old one broke, and only 2% because it was lost or stolen, based on a reader survey.

If you do crack your phone, many warranties don't look like a great deal when you tally the cost of a fix. Any iPhone owner can walk into an Apple store or authorized repair center and have an iPhone 6 screen fixed for $109. You might have to wait, but there's no extended warranty required.

With AppleCare+, even after you shell out $99 up front, Apple asks for an additional $79 deductible to fix broken screens. Your total out-of-pocket for a broken screen expense is $178—and you're only allowed two accidents in the life of your phone. (AppleCare also covers a battery replacement without the deductible.)

If you don't live near an Apple store—or you just like being self-reliant and have at least some experience tinkering with electronics—you could also just repair the broken screen yourself. I was able to replace the screen on a broken iPhone using a $110 kit from iCracked in about two hours. (Tech companies profit by making us think we can't repair our own gadgets, but honestly, it's just a bunch of tiny screws.)

Say something really bad happens to your phone, like it takes a swan dive into the loo. Worst-case scenario, the most Apple ever charges to repair an iPhone 6 is $299—again, without needing their insurance.

My family used to always buy AppleCare on more expensive purchases, like we did on a 2012 MacBook Pro with Retina display. It turned out to