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June 17, 2024

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    A home warranty is designed to give you peace of mind for those times when your major home systems stop working properly. There is nothing worse than having your air conditioning unit fail on a 95-degree day in the heat of the Summer or your dishwasher stop working on Thanksgiving.

    If you have a home warranty plan, call your provider and simply file a claim instead of dealing with repairs or replacements on your own. Having home warranty coverage is worth the convenience and peace of mind in these situations.

    Wondering if you need a home warranty plan for your home? This article breaks down whether a home warranty is worth it, what’s covered, and how it can save you money.

    Home Warranty Pros and Cons

    A home warranty supplements your home insurance. A homeowners insurance policy covers unexpected damage to your home — such as from a fire, tornado, or earthquake. A home warranty plan helps offset the cost of repairing or replacing home systems and appliances that fail due to normal wear and tear.

    Since home appliances and systems can break down at the most unexpected times, a home warranty provides peace of mind. Instead of paying thousands of dollars when critical systems like your water heater or cooling system break, call your home warranty provider. They will send a technician to your home and, depending on the issue, cover the cost to get it up and running again.

    Not all homeowners need a home warranty, so carefully weigh the pros and cons before choosing a coverage plan.

    Home Warranty Pros

    A home warranty has many advantages. For example, if you don’t have a home emergency fund, a broken system or appliance can drain your bank account. When you have home warranty coverage, you don’t have to worry about spending all your money to get your systems back up and running. Further benefits of home warranties include:

    • Cover the cost to repair or replace home systems and appliances. Repair or replacement of major home systems and appliances can be very expensive. Most home warranty plans cover your systems, such as your HVAC, electrical, plumbing, and kitchen appliances.
    • Provides peace of mind. If you have an older home, you will likely have older systems and appliances. A home warranty gives peace of mind, knowing you will not have to drain your emergency fund if one breaks down. 
    • Easily get technicians to your home. When an appliance or system breaks down in your home, you want a professional to come quickly. Instead of researching and finding qualified plumbers or electricians, your home warranty provider will do the work for you.
    • Appliances and systems fixed by professionals. If you don’t have a home warranty plan or an emergency fund, you may be tempted to do a quick fix instead of a full repair or replacement. With a home warranty, you are more likely to have a professional fix what is broken.

    Home Warranty Resources

    Home Warranty Cons

    Home warranties are not the best option for every homeowner. Even though home warranty costs are generally low, each plan requires a monthly or annual premium plus a fee when a service technician is sent to your home.

    • Pay a monthly or annual premium. To get home warranty coverage, you need to pay a monthly or annual fee.
    • Pay a service call fee for every claim. Each time you file a claim, you’ll pay a service fee or deductible between $65 and $125, on average.
    • Coverage limits and exclusions apply. The fine print of your service contract will tell you how much coverage you’ll get for each home system and appliance. The coverage cap is typically between $1,000 and $3,000 for home appliances, which might not be enough to completely cover repair costs in all cases. 
    • Plans get more expensive with more coverage. The more items you cover under your warranty, the more your plan will cost. If you have add-ons, such as pool coverage, your fee will quickly become nearly $100 or more each month.
    • You may need a home inspection. Although some warranty providers waive home inspection requirements, you may need to pass an inspection to qualify for a home warranty plan.

    What Factors Affect Whether Home Warranties Are Worth It?

    When systems break and appliances fail, it’s a real headache for homeowners. If you’re wondering whether a home warranty plan is worth it for you, consider these factors:

    • Age of your house
    • Your bank account
    • Type of systems and appliances in your home

    Age of Your House

    If you have a new house with brand-new systems and appliances, a home warranty is probably not worth it. Home warranties are only worthwhile if you use them at least once a year, and if your home is new, the likelihood of one of your systems or appliances breaking is much lower.

    If your home is seven years old or older, a home warranty is likely worth the cost. The average lifespan of most home systems and appliances is between seven and 15 years. As your systems and appliances approach this age, they will need to be repaired or replaced.

    Your Bank Account

    If you’ve built up a robust emergency fund, a home warranty might not offer much value. Average home repairs cost between $75 and $500, but the cost of replacing your household systems and appliances can range from $350 to more than $8,000, depending on the unit. 

    Your emergency fund should have a large sum in it should your major household systems and appliances break down. I recommend a home warranty plan if you have less than $10,000 in your emergency fund.

    home warranties are worth it to save money

    Type of Systems and Appliances in Your Home

    Not every home is a good candidate for a warranty, depending on the type of systems and appliances in the home. For example, it may not be worthwhile to purchase a comprehensive home warranty if you do not have central heating or cooling. These systems make up the bulk of coverage under home warranty plans. Check each plan’s coverage to make sure you’re not paying for services you’re unlikely to need.

    If your home is equipped with smart technology, you may not need a home warranty plan. Most home warranty providers dont cover smart systems or the smart components in your home appliances, such as a touchscreen on your refrigerator or a smart thermostat.

    A home warranty is worth considering if you have standard home systems and appliances such as HVAC, stove, dishwasher, washer, and dryer. With a national average plan cost of $50 per month, it covers repairs or replacements for these appliances.

    When ARE Home Warranties Worth It?

    For first-time homebuyers navigating the complexities of homeownership, landlords managing multiple properties, or home sellers seeking to sweeten the deal, the value of a home warranty can be substantial. For individuals lacking the time, skills, or inclination to tackle home repairs themselves or those without a robust emergency fund to cover unexpected expenses, the safety net provided by a home warranty is worth it.

    Home Warranties ARE Worth It if You Are a First-Time Home Buyer

    I recommend a home warranty plan for first-time homebuyers. Many new homeowners, having transitioned from renting, may not be as well-versed in home maintenance. Rather than shelling out thousands for individual repairs, a home warranty plan allows you to contact your provider for assistance, saving both time and money.

    Home Warranties ARE Worth It if You Are a Property Owner or Landlord

    If you are a landlord or own multiple properties, a home warranty is one of the best ways to save money on annual repair costs. For a monthly premium and a small service fee, you can cover major home systems and appliances.

    A home warranty plan not only saves you money but also time. Instead of hunting for a technician or tackling repairs solo, simply contact your warranty provider, and they’ll dispatch a technician to address the issue promptly.

    Home Warranties ARE Worth It if You Are a Home Seller

    For home sellers, a home warranty can serve as a compelling incentive for potential buyers. By investing in a home warranty, you demonstrate confidence in your home’s systems and offer assurance to prospective buyers that they’ll be covered in the event of unforeseen issues.

    Home warranties can make your house sell faster and for more money. According to a study by American Home Shield, homes in Tallahassee, Florida, that had protection plans or a home warranty sold for an average of $2,300 more and spent 11 fewer days on the market.

    Home Warranties ARE Worth It if You Are Not “Handy”

    If you’re not particularly handy or lack experience with home repairs, a home warranty plan is highly beneficial. Without the necessary skills, attempting repairs yourself could lead to further damage. A home warranty plan will help you properly maintain your home appliances and systems.

    Home Warranties ARE Worth It if You Don’t Have an Emergency Fund

    As previously discussed, a home warranty is recommended if you lack a substantial emergency fund. Maintaining a healthy balance in your bank account to address unforeseen expenses is crucial. With less than $10,000 saved, investing in a home warranty provides added financial security.

    Home Warranties ARE Worth It if You Want to Avoid Paying Thousands for New Appliances

    If you’re the average homeowner in the U.S., you don’t want to spend thousands of dollars on a new home system or appliance. With a home warranty costing as little as $50 per month, you can safeguard against these expenses. When a home warranty covers your systems and appliances, you can allocate your funds to what truly matters, whether it’s a vacation, home renovation, or other priorities for you and your family.

    home warranties are worth it
    Photo Credit: Shutterstock © kurhan

    When Are Home Warranties NOT Worth It?

    While home warranties can offer peace of mind and financial protection in many scenarios, there are instances where they are not worth it. If you have a good emergency fund or have bought a new-construction home, you do not need to invest in a home warranty right away. 

    Home Warranties Are NOT Worth It if You Purchase a New Construction

    If you move into a brand-new house with new home systems and appliances, you probably do not need a home warranty. Buyers of new-construction homes often find themselves with extensive warranties already in place, rendering additional coverage redundant. When your appliances are new, they are less likely to break, so you won’t need to make home warranty claims.

    Home Warranties Are NOT Worth It if You Just Bought New Appliances

    If you recently replaced your appliances or systems, a home warranty is not worth it. Most systems and appliances break after seven to 10 years, so a home warranty is not worthwhile until your new appliances begin to age.

    Home Warranties Are NOT Worth It if You Have Good Workmanship or Manufacturer’s Warranties

    Before investing in a home warranty, read through all of your manufacturer warranties for your home systems and appliances to see what is covered. If you find that several things overlap between a home warranty policy and the manufacturer’s warranty, you won’t get the value from purchasing a home warranty.

    What is Not Covered in a Home Warranty?

    Although home warranties provide excellent coverage for many of your major appliances and home systems, they do not cover everything in your home. Generally, home warranty contracts cover damage resulting from normal appliance wear and tear. A home warranty typically does not cover the following items:

    • Repairs due to installation error, misuse and improper maintenance
    • Repairs due to pests or pets
    • Manufacturer defect or design
    • Detected pre-existing conditions
    • Rust, corrosion and sediment issues
    • Structural problems (foundation, flooring, walls and paint)
    • Removal of radon gas, mold and asbestos 
    • Commercial equipment
    • Building code violations
    • Zoning code violations

    Home warranties cover your essential home systems and appliances, which means they usually don’t extend to luxury items in your home, like smart technology, swimming pools, and spas. Some home warranty providers — such as Liberty Home Guard — offer additional coverage at an additional monthly cost.

    Do Home Warranties Really Save You Money?

    Use your home warranty at least once per year, and you will save money on the repair or replacement of your home systems and appliances. The more claims you make, the more money you save. The exact amount you save depends on which system or appliance needs repair, your service fee cost, and your coverage limit. Make at least two claims per year to justify the value of your home warranty.

    If you require more replacements than repairs or need coverage for higher-value items, your home warranty will save you money. Repairing certain systems and appliances, like your air conditioner or water heater, is pricier compared to others, like your refrigerator or clothes dryer. Additionally, total replacements are more costly than repairs.

    Bottom Line: Are Home Warranties Worth the Cost?

    Yes, I have found in my experience of over two decades as a Realtor that home warranty plans are worth it for most homeowners. If you don’t have an emergency fund and use your home warranty plan at least twice per year, you’ll reap the greatest benefits. File a claim when you discover that a covered system or appliance is not working properly. Home warranty plans prove their worth by providing peace of mind and financial relief when breakdowns occur, making them a valuable investment for homeowners.

    FAQs About Home Warranties

    How does a home warranty work?

    Once you’ve purchased a home warranty protection plan and coverage begins (usually 30 days after signing a contract), you’ll be able to file a claim with your provider if a covered item breaks down.

    Once the claim is processed, a pre-arranged service technician will be sent to your home to inspect the appliance or item in question. If needed, the contractor will make the repair or schedule a follow-up appointment to complete a replacement. At this time you’ll pay the set service fee.

    Who can buy a home warranty?

    Home warranty coverage can be purchased by homeowners, home buyers, sellers, and real estate agents.

    How long does a home warranty last?

    Most home warranty contracts last one year, with the option to renew the contract at the end of the term. Some home warranty providers offer longer contracts with discounts on multi-year contracts.

    What’s the difference between a home warranty and homeowners insurance?

    Homeowners insurance covers structural damages to your home from natural disasters, fire, or theft, whereas a home warranty covers repairs and replacements on major systems and appliances that break down due to normal wear and tear.

    Article Update Log
    Reviewed for accuracy, cost data, industry best practices, and expert advice by Laurie Engle
    Editorial Contributors
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    Alora Bopray

    Staff Writer

    Alora Bopray is a digital content producer for the home warranty, HVAC, and plumbing categories at Today's Homeowner. She earned her bachelor's degree in psychology from the University of St. Scholastica and her master's degree from the University of Denver. Before becoming a writer for Today's Homeowner, Alora wrote as a freelance writer for dozens of home improvement clients and informed homeowners about the solar industry as a writer for EcoWatch. When she's not writing, Alora can be found planning her next DIY home improvement project or plotting her next novel.

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    Laurie Engle

    Expert Writer & Reviewer

    Laurie Engle is a freelance writer who provides insights to homeowners on topics such as the home warranty industry, relocation issues, and real estate trends. As a licensed Realtor since 2001 Laurie has acquired extensive expertise in dealing with home warranty companies and navigating the intricacies of the real estate market. In addition to her commitment to helping clients with their home buying and selling needs, she maintains a sharp awareness of market dynamics, including property values, interest rates, and local regulations.

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