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Is It Worth Buying a Home Warranty?

Many people like to purchases warranties on big ticket items such as cars and appliances. Warranties are also available on homes.

A home warranty is a type of insurance providing service, repair or replacement on specific items in a home such as heating, air conditioning, electrical systems, garbage disposals, built-in appliances, and plumbing.

Contractors may offer warranties on newly constructed homes. Sellers may pay for a policy to facilitate the sale of their house. Homeowners also purchase them for their existing homes.

Should you purchase a home warranty?

Before you do, understand how these programs operate. Many consumers don’t understand they do not exist to refurbish your house.

  • Home warranties promise only to keep major systems and appliances functioning. They do not promise to purchase new appliances or install new major systems.
  • The warranty company decides whether to repair or replace the broken system or appliance. Since replacement is the most expensive, it is always the last option.
  • When you have a repair, you will also pay a service visit fee which could be as high as $100 per visit. This is in addition to the annual cost of the warranty.
  • The warranty company, not the homeowner, decides which contractor will make the repair.
  • Warranties cover only normal wear and tear. They do not cover problems that existed before the warranty went into effect.
  • If the company believes the system hasn’t been properly maintained, it may refuse to make the repair. 

If you are considering renewing or purchasing a home warranty:

  • Read the fine print before you sign up. You want to be certain you understand what the policy covers and what it doesn’t. Some policies, for example, will only make repairs. There may be many coverage exclusions.
  • Look for a home warranty company with a long-term history in your area.
  • Compare different warranty programs for coverage levels and deductibles.

Although this Angie’s List article was written in 2009, it has good information and tips on selecting a home warranty program.

An alternative to purchasing a home warranty is to set aside the money you would have otherwise spent on the warranty. Put these funds in a designated bank account. If you have an issue, you can then decide whether to repair or replace. If you repair, you can then choose your own contractor.

This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.