Homebuyers and current homeowners have the option of investing in a home warranty. This financial product protects them in the event that something goes wrong with the home, but it also bears a significant expense.
What exactly do home warranties include? And when is it worth it to pursue one?
What Is a Home Warranty?
Home warranties work similarly to other warranty agreements, but with a few important differences. A home warranty is a service contract you’ll pay for with a monthly premium. Depending on the exact nature of your contract, you may also owe a service call fee whenever you call for repairs. These fees are designed to be highly affordable, resulting in savings if you need to call for repairs in the future.
What exactly does a home warranty cover? That depends on the company you’re buying from and the specific details of your policy. However, most home warranties cover all major home systems and appliances. This includes things like your heating, ventilation, and air conditioning, your plumbing and electrical systems, all your kitchen appliances and laundry appliances, water heaters, garbage disposals, ceiling fans, and garage door openers.
One important caveat is that home warranties will not cover repairs for pre-existing conditions or anything that has been poorly maintained or neglected. For example, if you install your refrigerator incorrectly or leave it open 24/7, it’s probably not going to be eligible for repair under your home warranty. Cosmetic damage is also typically not covered.
Prices for home warranties vary depending on the nature of the contract, the company offering that contract, and the size and scope of your home systems.
Factors That Make a Home Warranty Worth It
So what makes a home warranty worth it?
- You have many systems eligible for warranty coverage. If you have a big house with many appliances, a home warranty begins to look more valuable. Because anything could go wrong at any time, you might be grateful to have the coverage.
- You can’t afford to pay for repairs. If you can afford to save up and pay for your own repairs, a home warranty probably isn’t worth it. But if you have trouble saving up an emergency fund, or if you just want a more consistent, predictable expense on your ledger, a home warranty might be worth it.
- You won’t need immediate responsiveness. It’s important to realize that while some home warranty companies are prepared to dispatch repair people in an emergency, it could take days or weeks to handle less urgent repairs. If you’re not concerned about immediate responsiveness, a home warranty might be valuable to you.
- You’re comfortable with a third party coordinating repairs. You won’t have control over who is dispatched for your repairs, or how they’re dispatched. If you don’t mind a third party handling things, home warranties begin to look more attractive.
- You’ve done your comparison shopping. There are many different home warranty companies out there, with different standards and different types of policies. It’s important to do some comparison shopping before choosing one.
- You’ve read the fine print. You also need to be acutely aware of exactly what your home warranty policy does and doesn’t cover. In other words, you need to read the fine print of your policy before you agree to it.
- You’ve vetted the home warranty company. While there are many legitimate, helpful home warranty companies, there are also some nefarious actors and unscrupulous organizations out there. You need to vet your home warranty company before deciding whether a home warranty is worth it.
Other Factors to Consider
You should also consider these factors:
- Time costs. Choosing the right policy, making repair requests, coordinating repairs, and other tasks might take a lot of time from you. This can make home warranties a bit of a hassle.
- Restrictions and limitations. Restrictions and limitations can reduce what your home warranty covers. If a point of damage is considered cosmetic, or the result of improper installation, you might end up needing to pay for your repairs out of pocket.
- Delays and complications. Delays in dispatching service people can cause complications and headaches, especially if you need a certain appliance or system urgently.
- Paperwork and documentation. Home warranties also require you to maintain proper paperwork and documentation, proving adequate care for your home systems and appliances and keeping track of service records.
- Service issues. Many service people dispatched for home warranty service are perfectly competent and helpful, but this isn’t a guarantee. You may prefer choosing your own repair people.
So, is a home warranty worth it? The answer is yes, but only for some people in some situations. You’ll need to do your due diligence and consider your options carefully before deciding to proceed with a home warranty.
