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If the provider determines that the needed repair or replacement is covered by the warranty, they complete the work. The homeowner only pays a small service fee, plus the money already spent to purchase the warranty. Before buying a home warranty, document the age and condition of your major home systems and appliances, and note the average repair and replacement costs and life span for each. Also consider your financial situation and if you have funds set aside to pay for repairs or replacements. Compare the possible repair costs for the next year with the cost of a home warranty; if the repair costs exceed the warranty cost, purchasing a home warranty could be a good idea.
In lawyer-speak, a seller makes a warranty if she personally promises to pay to fix any issues you have with the home in the first x months after you buy it. Such promises may or may not be honored and you’re likely to struggle to enforce them in court. So you want to make sure you understand the contract and what’s included in your coverage before signing on. Property insurance provides financial reimbursement to the owner or renter of a structure and its contents in the event of damage or theft. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.
Are home warranties worth it? Maybe, if you choose carefully
Homeowners insurance protects you if your home or personal belongings are damaged or lost in a fire, lightning strike, windstorm, hailstorm or other similar event. It also covers vandalism and theft, and it has a liability component that covers accidents on your property and property damage to another person’s property. While a home warranty will cover the cost of some home repairs, the coverage plans are generally affordable. A home warranty will cost an average of $39 to $59 a month. Seriously consider a home warranty if you live in an older home, and if your appliances and systems are older or may soon be in need of repair. If you just purchased a new home and you aren’t familiar with the condition of the appliances and systems in the home, then a home warranty could make sense for you.
Ultimately, you have to decide if the peace of mind matters more than the expense. Barbara writes about a range of subjects, including homebuying, real estate, retirement, taxes and banking. Christy Bieber is a full-time personal finance and legal writer with more than a decade of experience. She has a JD from UCLA as well as a degree in English, Media and Communications with a Certificate in Business Management from the University of Rochester. In addition to writing for The Ascent and The Motley Fool, her work has also been featured regularly on MSN Money, CNBC, and USA Today.
Are Home Warranties Worth It?
As long as the repair is covered under the terms of your agreement, the contractor makes the repair or replacement, and the home warranty company pays for the cost. Not all costs are always covered by the home warranty, and you’ll have to pay for a service call fee each time you have an issue. Check the protection plan to see the list of exclusions and to determine if you want to upgrade your contract. This is where the importance of the company you choose is essential.
We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. In some cases, a home seller will offer a warranty to incentivize buyers and reduce the financial risks of ownership in the first year. Homebuyers may also choose to purchase their own warranty through a chosen provider.
Home warranty basics
If you plan to extend or replace a manufacturer warranty using a home warranty product, be sure to sign up before your existing warranty runs out. Damage covered by homeowner’s insurance is not usually covered by a home warranty. Damage caused by severe weather, vandalism, theft, water damage, fire damage and other damage extraneous to daily usage remain the responsibility of home insurance or you, the homeowner. The information and savings numbers depicted above are for demonstration purposes only, and your results may vary.
The company rankings on our site are independent of any marketing relationships that we may hold with a home warranty company. We may receive compensation for receiving quotes or placing advertisements. Companies are ranked solely on the basis of consumer reviews and ratings received from home warranty users. If you weren’t able to get an inspection or if you’ve lived in your home for a few years, a home warranty is the right choice. You’ll need a home warranty to cover things like normal wear and tear and to protect your budget in the event of a breakdown—because no one wants to pay for A/C repair in the heat of summer.
How long do home warranties last?
Your home warranty company already has affiliations with pre-approved companies in your area who they will send out in response to your claim. For most companies, there is a 30-day period between when the home warranty is purchased and when the homeowner can file a claim. If you end up using your home warranty to replace a leaky pipe, your savings over calling a private plumber for emergency help could easily amount to more than you paid for the policy upfront. When a system fails, your investment in a home warranty could really pay off.
If you want to know the diagnosis process, you can either check the manual obtained when you signed a warranty contract or ask the contractor. After diagnosing the problem, the contractor will contact your warranty provider for approval on repair or replacement. Some companies would require you to pay when the service request is opened, and others to pay it to the contractor on his arrival.
We offer special real estate plans to cover the home you're buying or selling. Whether you call it a deductible or co-payment, there is usually some charge per service call. The purpose of the deductible is to shield the warranty company from little tiny ticky-tacky repair requests. That’s understandable, however, the deductible applies not to the overall policy but to each claim. Homeowners insurance covers losses and damage to an owner's residence, furnishings, and other possessions, as well as providing liability protection..
You may also want a home warranty if you’re a new homeowner and your pre-purchase home inspection uncovered issues with the home's appliances and systems. This should give you a sense of whether or not a home warranty company is easy to do business with. The best home warranty companies won’t work overtime to deny your claims on covered items. Looking at customer reviews may help you detect these types of companies. Like home insurance, you’ll pay a monthly or annual premium for your home warranty plan. If you get a longer contract, like 2 to 3 years, there may be a discount on your plan.
Purchasing a home warranty is often worth it if you have older appliances and systems that would be expensive to repair and you don’t want to pay for repairs 100% out of pocket. It might pay for itself after one major repair or several smaller repairs. You can spread out the cost over monthly payments, cancel when you want and even transfer the contract to a new homeowner if you sell. Home warranties aren’t cheap — average annual costs are from $430 to $820 per year — so you want to be sure there’s at least a chance you’ll use it.
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