What does an extended car warranty involve?

It is quite difficult to explain to a person who is keen on getting the maximum that he can from an insurance company, what an  extended car warranty  is all about. He is more often than not, under the impression that he can practically get the moon, if his car meets with an accident. He does not realize that an extended car warranty can ensure that he gets some amount of reimbursement only when the terms of the contract allow him to do so. It would be a good idea for him to go through the contract beforehand.