Is a Home Warranty Worth It?

When you purchase a home, there’s a high probability you’ll be offered a home warranty to help protect you from expensive, unforeseen repairs on your home. While home warranties can act as a great safety net for many, they may not be right for everyone. 

To help you decide if purchasing a home warranty is right for you, we’re covering everything you need to know about them from what they are and how they work to some pros and cons.

What is a Home Warranty?

First, it’s important to note that a home warranty is not the same thing as home insurance. 

Home insurance protects policyholders against damage to personal property or the home’s structure due to major perils such as fires, hail, some types of water damage, and theft. 

Home warranties, on the other hand, are renewable, home-service agreements that provide discounted repair and replacement services for covered household appliances and systems. In this sense, you can think of home warranties as a compliment to home insurance.

What Do Home Warranties Cover?

Although coverage depends on your chosen plan, most home warranties cover major home systems such as the water heater, HVAC, plumbing, and electrical. Some plans cover home appliances such as refrigerators, washers, and dryers. You can also purchase add-on services for other items such as your pool, septic system, and more. 

How Do Home Warranties Work?

Home warranties are typically acquired during the purchase of a home, although they can be acquired independently of this transaction, and are paid either monthly or annually. 

With a home warranty, you will have a fixed service call fee and annual coverage limits for repairs, varying depending on the company.

When an appliance or system breaks down, you simply file a claim with the home warranty company, and they will send out one of their approved service providers to assess the situation. If the service provider determines the needed repair or replacement is covered under the warranty, they will complete the work, and the homeowner will only need to pay for the cost of the service fee. If the service provider determines the issue is not covered under the warranty, the homeowner will have to decide whether or not they need the issue fixed now, and if so, if they want that service provider to complete the work or want to shop around for cheaper options.

What Don’t Home Warranties Cover?

As mentioned, there are times when items needing repair are not covered under the home warranty. These items include (but are not limited to):

• Structural issues in the foundation, walls, or flooring
• Pre-existing conditions
• Improper maintenance
• Normal wear and tear
• Rust, corrosion, and sediment problems

In this way, there are some drawbacks to a home warranty. You may sometimes think you are covered, when in reality, you aren’t. 

Overall Pros and Cons

You have likely already picked up on a few pros and cons of home warranties, but to make things even more clear, let’s go ahead and line out what we see as some major pros and cons.

Pros

• Peace of mind (for those purchasing a home with used appliances and older systems)
• Convenience (no time spent researching repair technicians)
• Good for those who are not handy
• Relatively inexpensive to purchase (average monthly fees are less than $100)

Cons

• Set coverage limits per repair or per year
• Service call fees (typically $50-$75 every time an incident happens)
• Chance claims may be denied due to “improper maintenance”
• Less control as the warranty companies determine whether to fix or replace a system
• You may never use it

Is it Worth It?

Home warranties are a great way to protect your home and its systems when unforeseen problems arise. While they are worth it for some, they may not be worth it for others. For example, a home warranty may not be right for you if you just purchased a new home as new homes are typically covered by a manufacturer’s warranty. However, if you are someone who has an older home or systems and is not particularly handy, you may want to consider purchasing a plan.

Ultimately, to determine if you should purchase a home warranty, consider the pros and cons in relation to your specific situation. If you have any additional questions about home warranties, don’t hesitate to reach out!