It works like insurance - shared risk. You can't accurately tell if you will need a repair or cleaning during the covered period, but the underwriter can fairly accurately determine if they sell 10,000 plans how many will need what type of service. Just like you can't accurately predict if your house will be broken into, have a water leak, or burn down. But the insurance company knows if they cover 10,000 houses what the odds are.

The other thing is to look as who is underwriting the plan. A guarantee is only as good as the organization behind it. If they go belly-up, then your guarantee is no good.

Disclosure: I service plan claims for one of the larger underwriters.