Coming up to the 3 year mark next month, and have agonised over the samething. I've only had one mechanical thing go wrong with mine, which was a faulty paddle. Thankfully that and the software problems I had last year were all done under the factory warranty. I got the bills for them and they add up to aprrox £1k....taking into account labour charges as well.
I just know that if i go down the route of not going extended, then sure enough something major will go wrong and a massive bill will land on my lap! I dont want to then try and repair it using cheap parts etc. The car is far far better than that and doesnt derserve it!
I'm going down the zero excess route, and i think 80% of that is buying me "piece of mind" insurance and the other 20% is for when things actually do go wrong, which they will, no matter how small or big.
I've heard that if the engine does go completely, to replace it is around the £5-7K mark
that said, the BMW engine is legendary in its bomb proof build quality.......apparently and fingers crossed.
Ultimately we all work hard for our toys and it would be an injustice not to look afer them
Flapps