Are Home Warranties Worth It? [Is It a Good Choice for You?]

Being a homeowner is a rewarding, yet stressful, experience. You’re responsible for your home and all its components—if something is broken or in disrepair, you have to be the one to fix it. A home warranty is one way to ensure that any faults or defects will be repaired. But are home warranties worth it? In this article, we examine what home warranties are and whether getting one is a good choice for you.

What Is a Home Warranty?

A home warranty is a service contract between a home warranty company and a homeowner that covers a certain period (usually a year), after which you can decide if you want to renew your contract with the company. A home warranty definition specifies that a warranty plan provides repair and replacement of major appliances and systems in your home that break down. It does not cover normal wear and tear. Additionally, the warranty provides protection from unforeseen repair costs, so homeowners don’t need to worry about unplanned expenses.

Warranty plans are an attractive option for new homeowners who can’t handle any additional costly repairs in their homes. Home sellers can also purchase warranties to make the home they’re selling more appealing.

What Does a Home Warranty Cover?

A home warranty covers a large number of home systems and most of your large appliances. Home warranty coverage can vary from company to company, depending on the specific plan you have chosen. There is, however, a certain level of coverage offered by a majority of companies, which usually includes:

Electrical Systems

Electrical malfunctions can be common—so for some homeowners, this is a must-have coverage.

Plumbing

This type of warranty is a basic necessity for every household. This saves homeowners the trouble of looking for a qualified plumber, which is usually difficult and costly.

HVAC

Heating, ventilation, and air conditioning systems are costly and require constant maintenance—having them covered by a warranty can extend their lifespan and save you a lot of money.

Major Appliances (Fridge, Stove, Washing Machine)

Most warranties of this type cover all large appliances in your home.

Some companies offer the option to buy an additional warranty on appliances and other systems not generally covered in their plans. For an additional fee, you can buy optional coverage for swimming pools, home spas, grinder pumps, electronics, and other non-essential systems.
Certain damages are not covered by home warranties, such as those incurred by improper maintenance.

How Does a Home Warranty Work?

In the case of a defect or malfunction of one of your items included in the coverage, the warranty plan is activated through a few orderly steps:

1. The homeowner needs to call the warranty company and report the problem
2. The company calls one of their providers that deals with the specified defect
3. The provider makes an appointment with the homeowner
4. The defect is fixed or the appliance is replaced, depending on the provider’s evaluation
5. Homeowners need to pay only a service fee for the visit

Some companies allow you to choose your own contractor from a list of pre-approved service providers, while other companies don’t offer this option—they provide home warranty coverage only through their own chosen provider or contractor.

Homeowners typically need to file a claim within three days after a malfunction has occurred. Response times of a contractor to look at your problem vary from company to company, but they are usually dispatched within a few days after the claim has been reported. If the damage is extensive, homeowners might need to wait longer to have the problem fixed. (Replacements usually take even longer than complicated repairs.)

Most companies give you a repair guarantee that is valid from 30 to 60 days. If another visit is required during this period, you don’t have to pay service fees.

Key Takeaways

How Much Is a Home Warranty?

Home warranty companies offer different plans and provide various types of coverage, with prices that include monthly or yearly premiums. Home warranty prices can range from $25.00 to $50.00 monthly or $300.00 to $600.00 for an annual premium. The annual plans can be easier on the budget. Many companies offer a discount if you opt for a yearly plan, but there are cancellation fees if you want to prematurely terminate your contract.

Before purchasing a home warranty, consider these points:

• When you submit a claim regarding a malfunction in your home and providers are sent on service calls to inspect it, you’ll need to pay a service fee for the visit. These fees are between $60.00 and $125.00, depending on the purpose of the visit.
• The optional home warranty coverage costs extra. Prices are based on the appliances or systems that you want to be included in your plan. Additional coverage expenses can be between $100.00 and $500.00 yearly. The most basic additions include a second refrigerator or stand-alone freezer, while the more costly additions include such luxury systems as pools or home spas.

Some of the most popular home warranty companies have competing prices, as seen in this price list:

NOTE: Should I renew my home warranty? Continual repairs around the home can prove to be too much to handle, even for do-it-yourself (DIY) enthusiasts.

Home Warranty vs Insurance

Distinguishing between home insurance and a home warranty is very important.

What Is Homeowners Insurance?

Homeowners insurance is a property insurance policy that covers structural damage to your property and furnishings caused by fire and weather conditions, as well as theft. It provides liability coverage against accidents that have occurred on your property or inside your home. In addition to being a home repair insurance policy, it covers the cost of the loss or damage of your personal items and any injuries that might occur on the property.

What’s the Difference Between Home Insurance and a Home Warranty?

Home insurance and home warranty policies are complementary in that one cover what the other doesn’t. One of the main differences between the two is that home warranties are acquired voluntarily, while insurance policies are often required by mortgage companies if the homeowners are still in the process of paying off their mortgage.

Even though both of these policies have similarities—usually offering yearly premiums and a deductible, with home warranty cost changes each year—insurance policies are significantly pricier, with some reaching $1,200 yearly.

Both of these policies, however, will not pay for repairs that have been caused by neglect or improper maintenance. And you’ll face a denied claim and have to pay out-of-pocket for any problems related to normal wear and tear.

Are Home Warranties Worth It?

Is it worth spending money on a home warranty that you might not need during the year? Note some of the pros and cons to help homeowners decide if a home warranty is worth it:

Pros

There’s a belief that if people don’t buy a home warranty, they’ll be able to save a substantial amount of money each year. A warranty, however, might save you money, in addition to other advantages, such as:

Peace of mind

Homeowners have a guarantee that their appliances and systems are protected from any defect that might occur during the validity period of the policy.

Cost-effectiveness

Repairs can be very expensive, and a warranty ensures that you don’t have to spend a lot of unplanned funds on repairs. Nearly all plans have a coverage cap, allotting a certain sum of money for repairs. (But if the cost of the repair or replacement exceeds this cap, you have to pay the rest of the sum.)

Simplified repair process

This is perhaps the most important feature that makes a home warranty worth it. Homeowners don’t need to hunt down contractors—the company will find the right contractor or provider to solve your problem and dispatch them to your address.

Possible replacement

Faulty appliances can be replaced with new ones if it’s determined that the problem is too extensive to fix. In this case, you would get a new appliance (usually) free of charge.

Home warranties can be transferred

If you decide to sell your home before the homeowner warranty policy has expired, you can easily transfer it to the next owner, and your money won’t go to waste.

Cons

There are reasons why you might not invest your money in a home warranty:

Denial of claims

Homeowners might be denied coverage on the basis of bad maintenance—which is usually subjectively determined—or some other exceptions the company might list as reasons for the denial. This can be frustrating for those who paid for premiums in advance.

Old systems and appliances

Getting a warranty for a home filled with older appliances and systems would not be the best course of action because the provider might refuse to provide coverage, citing bad maintenance.

Lack of use

It’s possible that no defects occur in the course of your warranty. This would mean that the policy buyer didn’t utilize any of the offered services included in the home warranty cost, i.e., spending money on unnecessary service.

No choice in service provider

Most companies don’t offer the option of choosing your own service provider or contractor. If you’re not satisfied with their service, there’s not much you can do.

Service fees

Even if you get a warranty, and all the repair costs are covered, you’ll still need to pay a service fee each time a provider is dispatched to your home.

Conclusion

Deciding to secure a home warranty often poses a dilemma for homeowners. Warranty plans can save you money and turn home repairs into a stress-free experience. Having no warranty plan, however, may make sense in certain situations. Carefully consider all aspects of your home and your specific situation before signing a contract.