Are Home Warranties Worth the Cost?

April 8, 2019

When you buy your home, you may be offered the opportunity to buy a home warranty to save money on home repair services in the future. Buying a home warranty can be expensive and many homeowners are left wondering if it makes sense for them to purchase a home warranty. The cost of buying a home warranty is around $300 to $600 a year for a basic plan, with higher prices for more comprehensive plans or if your home is larger than average.

In some cases, a home warranty can help you save substantially on expensive home repair services. However, if the warranty doesn’t cover your claims or you don’t need any repairs during the warranty period, you may feel that you wasted money invested in a home warranty program. Here are some things to consider when evaluating whether a home warranty would be worth the cost in your situation.

home warranty

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What is a Home Warranty?

A home warranty is a home service contract that will cover the repair or replacement of various systems and appliances in your home. If an appliance breaks or if you have a plumbing issue, you call the home warranty company and the company will send out one of its contracted home service providers to evaluate and fix the problem. If it is a covered appliance damaged from normal wear and tear, the home warranty company will pay the repair or replacement of the item.

What Does a Home Warranty Cover?

Home warranty programs generally cover electrical, plumbing, HVAC systems and home appliances. Common home appliances that would be covered include the washer, dryer, oven, stove, and garbage disposal. You can sometimes purchase additional coverage for other parts of your home, such as your swimming pool.

advantages and disadvantages

Advantages and Disadvantages of Home Warranties

  • Advantages: The main benefit of a home warranty is convenience, especially if you own an older home. When you first move into your new home, you likely won’t have established relationships with a plumber, HVAC technician, and appliance repair specialist. If anything needs repair, you’ll simply call the home warranty company and they will dispatch a vetted contractor with experience completing similar types of repairs.

    A home warranty could save you money. If you end up needing a lot of repairs that exceed how much you pay for the home warranty, you’ll definitely save money. For instance, Home Advisor estimates that the average cost of a plumber ranges from $175 to $450 for a typical pipe repair job. If you paid $300 for your home warranty, you’ve already saved money.

  • Disadvantages: You’ll have to pay for the home warranty even on years when you don’t need any home repairs. If you end up only needing a very small repair, you may have been better off just paying for the repair out of pocket. It can be difficult to foresee what kind of home repairs you’ll end up needing, however, if the appliances and HVAC units in your house are old, they’ll most likely need servicing sooner than later.

Exclusions and Limitations of Home Warranties

Home warranties don’t cover everything. You’ll need to read the contract carefully to see what is and isn’t covered. Some homeowners become frustrated when they need to use their home warranty only to find that the appliance is excluded from coverage. Contracts can be pretty detailed. For example, your shower faucet outer hardware may be covered but the internal components may not be. Or your sewage pipe may be covered unless it is damaged by tree roots.

In addition, home warranties only cover regular wear and tear. If a person, natural disaster, or other intentional act damages the covered appliance or system, the home warranty may not cover it. For instance, if your home’s A/C system needs repair and the contractor determines that the A/C wasn’t well maintained, the home warranty company could deny your claim.

Can Home Warranties Save You Money?

Depending on what happens in your home, a home warranty can save you money. It will depend on what type of repair you need, the cost of the home warranty and what the repair would have cost you if you didn’t have the home warranty. Some home warranty companies require a service fee per visit, while others don’t. This fee typically ranges from $30 to $75. You will need to check the terms of your home warranty to see if there’s a service fee.

Below is a comparison of common home repairs, the average cost of the repair, and the cost of the home warranty. You can see how the home warranty could have saved the homeowner money.

Repair Avg. Repair Cost Avg. Cost With Home Warranty
Hot Water Heater Replacement $550 to $1,150 $300-$600 annually + service fee
HVAC Repair $340 $300-$600 annually + service fee
HVAC Replacement $5,210 $300-$600 annually + service fee

A home warranty may save you money, depending on what kind of repairs you end up needing. Having a home warranty can make you feel more secure in your home purchase, especially if you’re buying an older home with older appliances and HVAC units. For some homeowners, this is enough of a reason to invest in a home warranty. If you want to buy a home warranty, try to sign up for it when you buy your house, as you’ll likely get the best price. You can also ask for one from the sellers before you buy your home.