I think the cost is reasonable. But $10 / month put aside as a reserve
for replacement of your 12 year old system might be a better investment.

Is a 12 year old system "old" by generally accepted terms? I would have
thought not. Perhaps I am ignorant but I would expect the life of one of
these things would push 40 plus years with the occasional component
replacement. I'm thinking that lots of things would have to fail in concert
for replacement to ever be cheaper than fixing (or many things pending
failure).

Considering that the subject unit is of high efficiency, the same service
man that was upselling me could offer no reason to replace the unit in the
next 15 years assuming it is functional. Replacement generally would make
sense if it was a low efficiency unit and the energy savings would pay back
the replacement cost.... if it is high efficiency and working don't replace
it.

What components commonly fail in these things and what are the major
component design lives?

Oddly, the contract is perpetual and so is the vendor's committment to
repair the unit provided that parts are available.

Dave