A home warranty is an excellent contract that helps cover the cost of repairing or replacing major appliances and systems in your home. Many home buyers get a home warranty as part of their purchase agreement, but you don’t have to buy a home to purchase one.
While a home warranty can help save you money on unexpected repairs, it’s important to understand what is and isn’t covered by a typical policy. Sometimes, it may make more sense to self-insure against potential repairs rather than pay for a home warranty.
What Is Covered By A Home Warranty?
Most home warranties cover the major systems in your home, including electrical, plumbing, heating, and air conditioning. Some home warranties cover garage door openers, whirlpool tubs, water heaters, and built-in kitchen appliances.
Policies vary, so it’s important to read the fine print of your policy to see exactly what is covered. Generally, pre-existing conditions or cosmetic damage are not covered by home warranties.
How Much Does A Home Warranty Cost?
Budget is one of the top considerations of many consumers. A home warranty cost per year can range between $300 and $600. Some home warranty companies also charge a service fee of $50 to $100 every time you make a claim.
When you compare the cost of a home warranty to the cost of making a major repair, it’s easy to see why many people find them to be a worthwhile investment. For example, the average cost to replace an HVAC system is $5,000, while the average cost to repair a water heater is $600.
However, it’s important to remember that home warranty policies have limits. Most home warranty companies will only pay out up to $1,500 per item; some have a total payout limit of $5,000 per policy.
The Pros of Home Warranties
A home warranty can be worth the investment if you live in an older home, have an expensive home, or are otherwise more likely to need repairs. Here are other advantages of a home warranty:
Covers Unexpected Repairs
One of the biggest advantages of a home warranty is that it can help you budget for unexpected repairs. Rather than having to come up with hundreds or even thousands of dollars to fix a broken furnace, you’ll only have to pay the relatively small service fee required by your home warranty company.
Protection Against High Repair Costs
Sometimes, the repairs covered by a home warranty can be costly. If your air conditioner breaks down in the middle of summer, it could cost hundreds of dollars to fix. With a home warranty, you won’t have to worry about shouldering the entire cost of these repairs.
Gives You Peace of Mind
Another big advantage of a home warranty is that it can give you peace of mind knowing that your home is protected against expensive repairs. If something goes wrong with a covered item, you can simply call the home warranty company, and they’ll take care of it. This can be a huge relief, especially for first-time homeowners who may not be familiar with dealing with unexpected repairs.
The Cons of Home Warranties
A home warranty may not be for everyone, especially those who want to control spending. Here are a few possible drawbacks of a home warranty:
Service Fees Can Add Up
One downside to home warranties is that the service fees required to use them can increase over time. In most cases, you’ll have to pay a service fee every time you need to use the warranty, ranging from $50 to $100. These fees can quickly add up if you have multiple repairs in a year.
Coverage May Be Limited
Another potential downside to home warranties is that they may not cover everything in your home. Home warranties usually cover major systems and appliances, like your furnace, air conditioner, or water heater. If you have an older home, or if you’ve made extensive renovations, there’s a chance that some of your home’s components may not be covered by a warranty.
Not Available in All Areas
Home warranties are also not available in all areas. Sometimes, home warranty companies will only operate in certain states or regions. This means that if you live in an area where home warranties are unavailable, you won’t be able to purchase one.
Is A Home Warranty Worth The Cost?
Whether or not a home warranty is worth the cost depends on several factors. As mentioned before, a home warranty may be worth the investment if you live in an older home, have an expensive home, or are otherwise more likely to need repairs.
On the other hand, if you’re comfortable handling your own repairs or live in a newer home that isn’t as likely to need repairs, you may want to forego the expense of a home warranty.
The bottom line is that there is no one-size-fits-all answer to whether or not a home warranty is worth the cost. You’ll need to evaluate your own situation to decide if a home warranty makes sense for you.