Are Home Warranties Worth It?

The cost associated with buying and owning a home is significant. Just paying a mortgage can take up a significant chunk of your income each and every month. There are also all sorts of bills to consider, as well as unforeseen issues and needs for repairs that crop up. Luckily, a home warranty is something that can help protect you from some of these unexpected expenses.

While a home warranty can certainly be an ideal way to protect yourself when an appliance or home system breaks down, it is also another expense associated with your home. This article looks into the question – “Is a home warranty worth it?”

What Is a Home Warranty?

A home warranty is different from homeowner’s insurance. It is a contract whereby you will have the cost of repair or replacement of certain appliances and/or systems in your home covered by the home warranty company if there is some issue that occurs. There are different types of home warranty plans that you will come across.

Some will cover major household appliances like washing machines, refrigerators, and ovens. Other home warranty plans will cover the major systems in your home, such as heating, plumbing, and air conditioning systems. There will also normally be optional add-ons for your given policy. The likes of doors and windows will not be covered.

Homeowner’s insurance is different because it covers you in the case of damage, theft, or other types of perils to your home and its contents. A home warranty policy, on the other hand, covers any appliances or systems that are in good working condition and then break down as a result of regular wear and tear. Damage caused by natural disasters or misuse normally won’t be covered by a home warranty policy.

If you run into an issue with an item that is covered by the home warranty, you simply file a claim with the home warranty company. A service professional will then be sent to your home who will assess the situation. You will normally have to pay a small fee for this service professional. If the issue is deemed to be covered as part of the home warranty, the repair or replacement will be covered by your home warranty policy.

What is the Typical Cost of Home Warranties?

The cost of a home warranty plan will vary depending on what company you decide to use for the coverage.

The typical cost of a home warranty premium will be anywhere from $350 to $600 per year. There are normally different types of plans with different price points, depending on what you want to be covered. When you apply for a home warranty, you’ll provide some basic information about your home in order to receive a quote. This information will include details about the size of your home, the type of home you live in (condo, duplex, etc.), and possibly what appliances and systems you specifically want to be covered.

In addition to the home warranty premium that you’ll pay on a monthly or annual basis, you’ll also be charged a service fee should a technician need to come to your home. These fees will start from $50 and go all of the way up to $125 for a single visit. Keep in mind that these fees are quite small considering that you otherwise don’t need to pay for parts or labor.

The best home warranty companies offer a workmanship guarantee. For example, Liberty Home Guard offers a 60-day workmanship guarantee. If the same problem that was resolved reappears within 60 days, you won’t need to pay another service fee to have it fixed.  If you do not have a home warranty in place, the cost of repair or replacing major systems or appliances in your house could easily cost you hundreds or thousands of dollars.

Sample Repair and Replacement Costs – Without a Home Warranty

According to Select Home Warranty, these are some common costs associated with appliance and system repairs and replacements.

  • AC: $150 to repair, $5,500 to replace
  • Heat: $125 to repair, $4,500 to replace
  • Oven: $145 to repair, $900 to replace
  • Washing machine: $185 to repair, $650 to replace
  • Plumbing system: $125 to repair, $3,500 to replace

Without a home warranty, you would be responsible for these entire costs. With a home warranty, however, you would only need to pay a small service fee.

Is a Home Warranty Worth It?

There are a number of advantages associated with getting home warranty coverage. If you are purchasing a home that had a previous owner, a home inspection may showcase that the systems and/or appliances are nearing the end of their lifespan.

Home warranty coverage might help you mitigate some of the replacement or repair costs. It will also give you peace of mind that you will not be facing a litany of expensive purchases soon after you have just bought your home. A home warranty plan is also an ideal way to start to build relationships with local service professionals in your area.

Home warranty companies only use professionals who are properly licensed, insured, and have a good track record when dealing with customers. For older people, the convenience of having someone else take care of the repair or replacement of appliances or home systems will be very convenient.

Even if you are selling your home, you should consider getting a home warranty. According to Choice Home Warranty, they’ve found that sellers who have a home warranty in place end up selling their homes on average for $2,300 more and 11 days faster than those without home warranties. After you sell your home, you simply transfer the contract to the new homeowner.

Getting the Most Out of Your Home Warranty

It is vital that when you are looking at home coverage, you are fully aware of exactly what is and is not covered by a policy. People often mistakenly believe that certain items are covered, when this is not the case.

You also need to be aware of any limits on payouts during a given period. Additionally, some home warranty companies will not comply with a claim if they deem that there has not been proper maintenance for a given item. It’s important to keep any maintenance records you have for your appliances and systems organized so that this won’t become an issue.

What to Look Out For

If you are going ahead and looking to get a home warranty policy, it is important that you do so in the right way and find the best home warranty company for your needs. First and foremost, you want to make sure that you are dealing with a reputable company. Make sure that you check out a given home warranty company’s reviews on our site.

Final Thoughts

Home warranty coverage is often a good idea if you are looking to avoid the hassle of having to deal with repairs or replacement of home appliances and systems on your own. They provide great peace of mind that you will not be left out of pocket when something breaks down.

While there are some possible downsides, for most people, the pros outweigh the cons. To find a respected and reliable home warranty provider today, you can check out our expert reviews on those that are vying to be the best home warranty company out there.

Andrew Omalley Andrew Omalley Last update:
Andrew is a freelance writer who has been crafting valuable pieces of content relating to personal finance for more than five years. Previously, he studied Economics & Finance at university and he has professional qualifications relating to financial advice.