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I bought a $5k warranty through Universal Car Care when I bought my X. It's covered $7k in repairs and I still have about 18 months left on it. One of those repairs was the valve stem seals, which was a $4k job. There have been a few things not covered (door handle mechanism, CCV, and a couple other little things). I'm happy with the purchase.
That said, the OP's warranty sounds pretty crummy with lots of limitations. I'd look for a better one. If there isn't a better option, it's not hard to get $2k of repairs on these cars so it might pay off.
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2006 X5 4.4i
Sport package, summer package, cold weather package, DSP + Nav
Bought 2/14 with 73k miles
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