Thanks everyone for their advice...
I've decided to save my $1300.00 and not purchase the insurance. Here in Austin, we have pretty good roads. Plus my wheels are 18 inch, not 19 or 20. Plus, my tires will be all season, not super low-profile (like on Sport line or M3, etc.).
I'll go to Discount Tire and get the tires warranty for $160. If they can patch it, fine. If not, I get a new tire.
I don't think I'll have bend rim problems. I don't drive like a maniac and tend to avoid these potholes pretty well.
Now, how about key replacement insurance for $ 300 for 5 years? Just kidding....