Should You Get a Home Warranty? Are They Worth It?
A home warranty can be a financial safety net, potentially saving you money down the line by covering the cost of repairs or replacements for major home systems and appliances. But are they worth the investment? The answer depends on your individual circumstances.
This article delves into the details of home warranties, including what they cover, how much they cost, and the pros and cons of having one.
What Is a Home Warranty?
A home warranty is a service contract that covers the repair or replacement of essential home systems and appliances due to normal wear and tear. It’s important to understand that a home warranty is not the same as homeowners insurance. Homeowners insurance protects your home from damage caused by unforeseen events like fire, theft, or natural disasters.
“The warranty is designed to cover items that are in satisfactory, good working condition upon occupancy, and then fail due to normal wear and tear,” says Mike Sadler, senior VP of operations at America’s Preferred Home Warranty.
Home warranties typically cover:
- HVAC systems (air conditioners, heating units)
- Electrical systems
- Plumbing systems (including toilets, water heaters)
- Major appliances (refrigerators, ovens, washers, dryers)
- Leaky roofs
- Septic or well pumps
However, they generally do not cover structural features like foundation problems, doors, walls, windows, or non-major appliances like a countertop microwave. Damage caused by the homeowner, such as lack of maintenance, or pre-existing conditions are also generally excluded. Furthermore, a home warranty won’t cover items already under a manufacturer’s warranty.
Are Home Warranties Worth the Cost?
The cost of a home warranty can vary, ranging from roughly $222 to $1,877 per year, with the typical annual cost around $1,049, according to HomeAdvisor. Plans can be more expensive if you want extra coverage for things like guest houses or swimming pools. In addition, you’ll also pay a service call fee each time you request service, usually between $75 and $125.
Consider those costs in comparison to the expense of replacing a central air conditioning system, which can average $5,500, according to HomeAdvisor. A home warranty could pay for itself if you don’t have readily available funds for such unforeseen repair expenses. It’s worth mentioning, though, that if your home is older and its systems are outdated, replacement parts might not even be available, making the warranty less valuable. Always ask the provider about your payment obligation if something can’t be fixed.
Ultimately, whether a home warranty is worth it comes down to peace of mind versus the expense. If you’d rather not face a large, unexpected repair bill, a home warranty could be a good option. However, if you are comfortable handling unexpected costs, or are very handy and can do repairs yourself, then a home warranty may not be a good deal.
When to Skip a Home Warranty
One time to usually skip purchasing a home warranty is when buying new construction. Newly constructed homes typically come with builder warranties for materials and workmanship, which cover plumbing, electrical, heating, and cooling systems. Appliance warranties are often provided by the manufacturer.
Also, if you’re diligent about home maintenance and have systems professionally serviced annually, you may be able to avoid the problems a warranty would address.
Pros and Cons of Home Warranties
While home warranties offer potential benefits, they come with limitations.
Pros:
- Offers peace of mind, especially for homes with older systems or appliances.
- Provides assistance if you lack DIY skills for home repairs.
- Home warranty companies can find and hire trusted professionals for you, which is useful if you’re new to an area.
- Coverage tends to be broader and for a longer period compared to a manufacturer’s warranty, and warranties are often renewable.
Cons:
- Home warranty companies enforce dollar limits per repair, item, or year; restrictions differ among providers.
- Service call fees are required for each issue.
- Home warranty companies decide whether to repair or replace an item. If replacement is necessary, the model they choose might not be the one you would have selected.
- Claims can be denied if the company determines that an item hasn’t been properly maintained.
Frequently Asked Questions
Is a home warranty different from homeowners insurance?
Yes. Home warranties and homeowners insurance are distinctly different. Home warranties cover wear and tear to certain home systems while homeowners insurance covers damage from perils like fire or theft. Also, home warranties are optional while homeowners insurance is generally required by a mortgage lender.
Is a home warranty worth having?
That depends on your individual needs and circumstances. For older homes with older appliances, a home warranty can offer financial protection and peace of mind. But for new construction, the builder likely provides a warranty. Carefully examine the warranty’s terms and conditions to be certain you understand what’s covered.
