I don't normally buy extended warranties on anything. Consumer Reports and many money advisers advise against buying extended warranties, particularly from retail stores such as Best Buy.
That said, I considered that the Kindle is a relatively delicate device with a glass screen and it's taken out of the house unlike most of my electronics. The fact that SquareTrade also covers accidental damage, which most extended warranties on electronics don't offer, and it's relatively cheap, made me reconsider my policy on extended warranties. I bought a two-year SquareTrade warranty for both my and my wife's K3 3Gs. I only got two years with a 35% off coupon they had last week, because I assume that the K4 will be out within 18-24 months and I will most certainly want one of those! The K3 3G costs a little more than the Wi-Fi so the coverage costs a little more, but it came to less than $25 each.
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