“We’re buying a house. Should we buy a home warranty?” Seems like a relatively tame question, right? But post it on Facebook or Nextdoor and watch the impassioned responses roll in. You might as well ask, “What political party should I belong to.”
Who knew people were so fervent about home warranties! Everyone has their own experience; expect to hear a few people call them “a scam” or at the very least a waste of money. Others will regale you with their tale of how having a warranty saved them from a freeing winter because they couldn’t afford to fix their furnace without it.
In the end, the decision is personal and largely based on how comfortable you are coming out of pocket if one of the more expensive items in your home, like the air conditioning unit or hot water heater, should malfunction and need to be replaced. I’m breaking down three important particulars so you can make an education decision.
Know the cost
“A basic home warranty costs about $350 to $500 a year or more,” said Money Talks News. “A warranty typically covers kitchen appliances, plumbing, water heater, heating and electrical system components, sump pump, whirlpool tub, and ceiling and exhaust fans, according to Angie’s List. “‘Enhanced’ plans, purchased for another $100 to $300, provide added coverage for such things as a washer and dryer, air conditioning system, refrigerator and garage door opener. Optional coverage can be added, including for pools and septic systems.”
You can typically break down the annual cost into monthly payments if that’s more comfortable for you, but the cost of the warranty itself isn’t the only thing you’re responsible for paying. Service calls will typically also cost you; put in a work order for a broken microwave or a tub that won’t drain and you’ll be responsible for paying for the privilege of having a professional come check it out, and—hopefully—fix it.
“Home warranty deductible, or service call fees, is an important concept to master if you want to understand how to find the cheapest home warranty plans for your needs,” said Review Home Warranties. With most home warranties, a deductible or service call fee will be required, “with an industry average of approximately $75 per visit. Some companies, like American Home Shield or TotalProtect Home Warranty, let their customers choose the amount of a deductible, which depends on the amount of premium. The higher the premium, the lower the deductible.”
Consider your peace of mind
Many homeowners opt for a home warranty for major “just-in-case” scenarios. Just in the case the air conditioning unit crashes and burns. Just in case the hot water heater dies. Just in case there’s some other expensive repair that pops up, without the ability to comfortably pay for it. With the cost of some of these items running into the thousands—the average for a new air conditioning unit and installation, per HomeAdvisor, is $5,413!—the peace of mind factor is huge.
“For a homeowner who doesn’t have an emergency fund or who wants to protect their emergency fund, a home warranty can act as a buffer,” said Investopedia. “Home warranties also make sense for people who aren’t handy or who don’t want to worry about tracking down a contractor when they have a problem. Warranties can also make sense for people with expensive taste in appliances.”
But…understand that not everything is covered
There’s always a chance that the item you need repaired is not covered under your warranty for one reason or another. “Having a home warranty doesn’t mean the homeowner will never have to spend a penny on home repairs,” said Investopedia. “Some problems won’t be covered by the warranty, whether because the homeowner didn’t purchase coverage for that item or because the warranty company doesn’t offer coverage for that item. Also, home warranties usually don’t cover components that haven’t been properly maintained. Furthermore, if the warranty company denies a claim, the homeowner will still have to pay the service fee and will also be responsible for repair costs.”
In our case, limitations spelled out in our home warranty contract regarding the replacement of outdated parts and refrigerant costs for our broken air conditioning unit meant we had to come out of pocket for $1,500. The lesson here: Read the fine print so you’re prepared.