Picture this: your beloved home, the place where countless memories have been made, suddenly faces a major system breakdown or appliance failure. The repair or replacement costs can be overwhelming, and homeowners insurance might not cover everything. This is where a home warranty comes in.
Do you need a home warranty?
Homeowners insurance protects your home and belongings from damages, but it has limitations. A home warranty can fill in the gaps by covering normal wear and tear on your home’s systems. It can protect your plumbing, electrical, HVAC system, and even appliances like your refrigerator and stove.
The question is: is a home warranty worth it? Understanding how home warranties work can help you make an informed decision.
What is covered in a home warranty policy?
Home warranties cover repair, replacement, and maintenance costs for appliances and home systems. This can include your stove, dishwasher, refrigerator, garbage disposal, washer and dryer, hot water heater, plumbing system, electrical system, HVAC system, and ductwork.
While coverage for these items may be automatic in a standard home warranty policy, you may need to purchase additional coverage for specific items like pools, hot tubs, septic systems, or well pumps.
What is not covered in a home warranty policy?
As comprehensive as home warranties can be, there are certain things they may not cover. For instance, home warranties usually don’t cover appliances or systems that are still under a manufacturer’s warranty. They may also exclude cosmetic damage, damages caused by pests or misuse, pre-existing conditions, acts of nature, and modifications needed to complete repairs.
How does a home warranty work?
Home warranties work similarly to other warranties. When you have an issue, you file a claim with the warranty company, and they send out a technician to assess the situation. If the event is covered, the warranty can help with repairs or replacement costs. You may have to pay a deductible, but the policy should cover the rest.
Home warranty vs. home insurance—same?
Home warranties and home insurance are not the same. Home insurance covers your home’s structure, personal belongings, and other structures on the property (e.g., shed or garage), while a home warranty covers appliances and major home systems. Home insurance pays to repair or replace your home, structures, and belongings, while a home warranty pays for repairs, replacement, or maintenance of covered appliances and systems.
What does a home warranty cost?
The cost of a home warranty depends on the company and the coverage included. A basic home warranty can cost $500 or more annually, but adding supplemental coverage can increase the cost. Comparatively, a typical home insurance policy costs around $2,777 per year. It’s essential to consider the cost of a home warranty alongside your existing home insurance policy.
Is a home warranty worth it?
Whether a home warranty is worth it depends on factors such as the age of your appliances and systems, existing warranty coverage, and affordability for out-of-pocket repairs. Here are some pros and cons to consider:
Pros
- Convenience: Home warranties provide easy access to qualified technicians.
- Reassurance: Knowing your systems and appliances are covered offers peace of mind.
- Cost savings: Home warranties can be more cost-effective than paying for repairs or replacements.
- Time savings: A home warranty saves time by handling repairs and maintenance.
Cons
- Exclusions: Home warranties may not cover everything, and you may still have out-of-pocket costs.
- Limited choice: If your preferred repair person isn’t covered, you’ll need to use the warranty company’s network.
- Claims denial: Filing a claim doesn’t guarantee it will be honored.
- Time limits: Home warranties have a specified timeframe and require renewals for continued coverage.
How to choose a home warranty
Choosing a home warranty requires research. Compare different companies, coverage options, and consider these questions:
- What coverage do you need?
- Are your appliances or systems already covered by a manufacturer’s warranty?
- What premium and deductible limits are you comfortable with?
- What exclusions or limitations apply?
Gather quotes from multiple home warranty companies, read customer reviews, and evaluate customer support and repair professional networks.
Where to apply for a home warranty policy
When applying for a home warranty, choose a reputable company with good customer support and positive customer ratings. For example, Choice Home Warranty offers 24/7 support and has a nationwide network of repair professionals.
Start by getting a rate quote, provide the necessary information about your home and systems, and customize a policy that suits your needs.
When is a home warranty worth it?
A home warranty may be worth it if you:
- Want to avoid paying for repairs or replacements out-of-pocket.
- Own an older home or appliances approaching the end of their lifespan.
- Prefer not to handle repairs yourself or find repair professionals.
- Have limited savings to cover repair costs.
- Seek peace of mind with a “just in case” policy.
When to skip a home warranty
Not everyone needs a home warranty, especially if you:
- Already have manufacturer’s warranty coverage.
- Purchase a new construction home with warranty coverage.
- Are capable of making repairs or have trusted contractors.
- Can afford out-of-pocket repair or replacement costs.
Home warranty alternatives
Besides a home warranty, there are other options to consider for covering home repairs or replacements:
- Savings or emergency fund: Set aside money specifically for unexpected expenses.
- Interest-paying checking accounts: Earn interest while having easy access to your funds.
- Certificate of deposit (CD) accounts: Save money for planned repairs or replacements with a fixed-term deposit and interest.
- Personal loans: Consider a loan for repairs if you lack cash reserves.
Compare these alternatives based on your needs and financial situation.
Getting a home warranty offers peace of mind, but the cost must be considered. Before purchasing a policy, assess your coverage options and the potential expenses involved. Remember, it’s your home, and you’re in control of making the best decision for your peace of mind and financial wellbeing.