I'm getting a set of Michelin Pilots from Discount Tire.
Roughly $200 each.

They want to charge me another $120 for a "free replacement" offer, where you get a new tire if something goes wrong. The normal guarantee offers to pro-rate the tire that is busted, say if you blow the tire on a pothole.

The more I look at it, the more I think the cost sucks.
The tires will probably only last for 25,000 miles at best.

It's tire insurance.
A waste?

 

IF they offer a prorated replacement already, then I'd not pay the additional $120.
Although, I have never heard of Discount offering a free replacement warranty of any sort.
Keep in mind...
The extra you pay is also supposed to cover things like balance and rotation. However, rotation is specifically NOT covered as the tires have to be dismounted from the rims and moved side to side to rotate. The dismount and remount is NOT covered in that $120.

Additionally...
make sure two things happen when you purchase the tires:
1. Have a HIGH SPEED static balance performed. (they can only do static due to lack of lip to which the can attach the weights), and make sure that the weight clear the rotors upon installation.

2. Have the car "Torqued in air" which means they do the final torque of the lugnuts without any weight on the car. This helps to insure that the wheel is properly centered and is not going to show centering vibrations at higher speeds.

If you go to after market wheels in the future, pay the $15 and get the hub centric rings for around $15 to make doubly sure that the wheels are centered.