Home warranties may be a smart way to prevent costly out-of-pocket repair fees, but it depends on your situation. For many homeowners, particularly those in older homes and with older appliances, a home warranty is a good way to rest easy knowing you won’t have to pay hundreds or thousands of dollars out of pocket for a major appliance or system repair or replacement.
Another advantage of a home warranty is that it often covers breakdowns caused by normal wear and tear. If you have appliances or home systems nearing the end of their life spans, a home warranty could be particularly helpful. An HVAC system can cost $5,000 or more to replace, but with a home warranty, you might only have to pay a service call fee of $75-$125.
But not all home warranties are created equal. Some have very restrictive coverage, some have penalties that make the service fee almost meaningless, and some have payout caps that mean if the cost of repairs reaches a certain amount, you’ll have to cover the difference.
A further drawback to home warranties is that you don’t pick the repair service person who comes to your home to take care of your repair. Instead, home warranty companies maintain a list of approved contractors, and you use someone on their list. If you have a preferred service, chances are you can’t use it. Some home owners also complain that service is delayed if the company was busy doing other jobs at the time you filed your claim.
Consider whether the savings you may recover if something does go wrong are worth the costs. If you live in a new home and your appliances are relatively new, you may not need a home warranty because manufacturer warranties or home insurance coverage may be sufficient. However, if your home is old and appliances are prone to breaking down, you may need the assistance a home warranty offers to avoid financial disaster.
So, in the end, whether it’s worth it or not comes down to your home’s age, your appliances’ reliability and your risk tolerance. If you like having peace of mind that you’re protected from expensive repair bills, it might be a good idea for you.
