Are Home Warranties Worth It?
These Plans Can Be a Gamble If You’re Not Careful
Home warranties are annual service contracts that cover repairs or replacements of home appliances, systems, and other components when they break down. These plans provide assurance that when items you frequently use quit after normal wear and tear, you won’t need to dig deep into your pockets to fix them or purchase new ones. But do you really need a home warranty? Is it worth paying for one? Let’s find out if the benefits of home warranties justify their costs.
What Is a Home Warranty?
Home warranties aren’t insurance plans. Instead, they are service contracts that function more like discount plans on repairs and replacements for items covered under your agreement.
In general, home warranty coverage includes the major components of home systems like electrical, plumbing and HVAC, and home appliances like refrigerators, stoves, and washers and dryers. Some companies allow you to add coverage for items like a second fridge, a pool, pumps, and more.
You’ll need to read your terms and conditions closely to know exactly what’s included. Contracts typically place limitations on not only the types of covered items, but also the conditions under which they’re eligible for a claim. Many home warranties only cover breakdowns due to normal wear and tear. If your dishwasher door breaks because you placed something heavy on it while it was open, you’re probably out of luck. But if it’s not draining properly, you can call the warranty company.
Is a Home Warranty the Same as Home Insurance?
Home warranties and home insurance protect your home in different ways. Home warranties cover some of the costs of repairing and replacing appliances and components of major home systems when they break down from normal use. They may even cover things like leak repairs to a worn-out roof.
On the other hand, home insurance protects against home and personal property damage from covered perils like fires and natural disasters as well as liability from injuries that occur on your property.
How Does a Home Warranty Work?
Your contract must specifically list your problem and say it’s covered for you to be able make a claim. You can typically make a claim and request service by calling your home warranty company. It will assign you a local professional to diagnose and fix covered issues. You may be asked to pay your service fee beforehand or after the visit. The FTC suggests putting all repair requests in writing and keeping communication records.
How Much Does a Home Warranty Cost?
Basic home warranty plans cost an annual average of $350 to $600, or $29.17 to $50 per month. Extended warranties add another $100 to $500 per year. Services fees are usually $50 to $100 for each repair or replacement. Your prices can vary based on:
- Scope of coverage
- Plan type
- Added benefits/services
- Home size
Companies like Cinch Home Services have plans ranging from $27.99 to $39.99 per month, while Blue Ribbon Home Warranty ranges from $27 to $64 per month on a single-family home.
Will your home warranty save you money? Here are average repair costs for commonly claimed items, as well as how much you might save with a warranty plan.
|Item||Average Repair Cost||Average Savings w/ Home Warranty|
Pros and Cons of a Home Warranty
360° protection when coupled with home insurance
Security for homes with older appliances and systems
Selling point for homebuyers
Restrictive exclusions and claim caps
Service time delays
Can’t choose repair companies or contractors
Service companies may not provide workmanship warranty
Claims can be denied if you don’t have proof of maintenance or if the problem is deemed pre-existing
Home warranties fill in some protection gaps left by homeowners insurance, and they can cover secondary damage, appliances, and home systems. Having a home warranty might even help you sell your home faster and for more money, if you ever decide to move, the contract can be transferred to the new buyer.
However, complaints about home warranties arise when homeowners don’t get the benefits they expected. To avoid disappointment, be sure to thoroughly read the fine print and understand what’s covered and under what conditions, as well as your claim caps, and how repairs and replacements are handled.
Should You Skip the Home Warranty?
Here’s when to consider getting a home warranty, and when you should forego it entirely.
When To Get a Home Warranty
Home warranties are best for homeowners with home systems and appliances:
- With worrisome marks on home inspection reports
- Not covered by a builder’s or manufacturer’s warranty
- With no extended warranties from credit card providers
- That were maintained as per the manufacturer’s instructions and are reaching the end of their lifespan
When To Skip It
Home warranties may not be a good fit when you:
- Have a general emergency fund
- Are looking to cover nonmechanical structures like windows
- Have new appliances covered by a manufacturer’s warranty or by a credit card’s extended warranty
- Find exclusions and claim caps make the plans too limiting to be valuable
- Prefer to choose your own contractors and replacement brands
- If you have new appliances and home systems, you may already have coverage through a manufacturer’s or builder’s warranty or credit card extended warranties.
- Home warranties may be a better fit for people with proof of maintenance for older appliances or components.
- Home warranties often don’t cover as much as people think they do. Read the fine print thoroughly to ensure you have the coverage you expect and can meet claim requirements.