The Pros And Cons Of Buying A Home Warranty

Homeownership, where the dream of having your own space becomes a reality. Once you’ve purchased a home, you’re likely to encounter numerous decisions and considerations, one of which is whether to invest in a home warranty, and you maybe looking to weight the pros and cons of a home warranty.

Well, a home warranty is a safeguard against unexpected repairs and replacements. However, like any significant decision, it has advantages and disadvantages. We’ll help you navigate this and equip you with the knowledge to make an informed choice.

Pros and cons of home warranties

Let’s get into the details and talk pros and cons of a home warranty here:

PRO: Home warranties cover repair or replacement of your home’s systems if they’re faulty or worn out due to age.

It’s important to note here that the scope of home warranties is to cover you when your appliances break down due to age, not accidental or purposeful damage. If your home is broken into, for example, and some of your appliances or systems are damaged, this would be covered by your home insurance, not your home warranty.

CON: Most home warranty plans do not cover any construction costs that may be needed to move or upgrade electrical, for example. Your home warranty will only cover the system or appliance replacement, repair, and installation.

PRO: You can get basic to increasingly more comprehensive home warranties. You can customize each home warranty policy to cover what you want. If your primary concern is your home systems like electrical, plumbing, and HVAC over appliances, you can have a limited policy that only covers those systems. 

Most standard home warranty policies cover homes up to 5,000 square feet. You can expect an additional fee if your home is more than that. 

CON: If you don’t want to go with the full meal deal policy, it can be tough to pick and choose which appliance and systems to have covered. It’s a good idea to consider the age and cost to replace each item and include those closest to their expected lifespan and more expensive to replace.

It’s a great idea to do some online cost comparisons for appliances and talk to certified tradespeople about the cost (including materials and labor) to replace systems like your electrical, HVAC, and plumbing. This way, you’ll be armed with the knowledge and context you need to decide what you want your home warranty to cover.

PRO: You can get a home warranty on appliances that aren’t brand new, even if you weren’t the first owner. This comes as a surprise to some people because we generally think of warranties coming with brand-new products. In this case, your appliances can be second or thirdhand, and you can still get coverage. Keep in mind that your warranty provider will consider the age of your appliances and home systems when deciding what they’ll include in your policy, and it’s at their discretion to choose not to cover certain things.

For example, you shouldn’t expect to get coverage on a 20-year-old washing machine that’s on its last legs only to have it break down three months into your policy and have it replaced with a brand new, top-of-the-line model. That said, within reason, home warranties can absolutely cover appliances and systems that aren’t brand new!

CON: For all appliances or systems covered by home warranties, ensuring regular maintenance is key to ensuring you’re protected. Home warranty policies have it written in that maintenance is critical to extending the lifespan of your items, and they can deny coverage if things haven’t been well-maintained. 

The potential downside of getting coverage for appliances and systems in a home you are the second or third owner of is that you can speak to how well-maintained those things were before you owned them. A good way to get around this is to pay for a maintenance visit (by one of the service companies on the approved list from your warranty provider) before signing your policy. By doing this, you can verify the condition of your covered items at the start of your policy. 

PRO: Home warranty policies are renewed yearly, but you are not locked into a more than one-year term. Some policies do offer discounted rates for longer terms, but a standard term is one year. 

CON: Most policies will only allow you to add or subtract items from your policy at your renewal time. Some exceptions are made if you buy a new appliance you didn’t previously have. For example, if you added a dishwasher to your kitchen when you didn’t previously have one, you may be able to add this to your policy. 

The reason for this is to discourage homeowners from declining coverage on certain items until they suspect a breakdown might be coming and then adding the appliance or system.

PRO: For a comparatively small premium, your home warranty can save thousands of dollars. Home insurance premiums are generally much costlier than home warranties, ranging from $500 to $1,500 annually. 

When you consider that newer appliances tend to have expected lifespans of only around ten years, and many homes are furnished with appliances bought all at once, it’s not a stretch to imagine having to replace two, three, or even more appliances within a year. Compare that to even a higher home warranty premium, and you’ll be thanking your past self for your good choices!

CON: It’s always possible that you hurry on by for several years, paying for your home warranty premium but never needing a repair or replacement. However, much like car insurance, you hope not to have to use it but are relieved that it’s there when you need it. 

PRO: If you’re not handy or don’t want to have to worry about making repairs, home warranties take that off your plate. Many of us are too busy to learn the ins and outs of replacing a dryer drum and would prefer to let the pros handle that. Not to mention that when it comes to home systems like electrical and plumbing, safety concerns mean it’s your best bet to stay safe and bring a pro in. 

CON: If you want to choose contractors and repair companies coming in or be more hands-on with the process, a home warranty might not be the right solution for you. Home warranty providers have an approved list of repair services and trades you must use to be covered, so your choices are limited.

PRO: Home warranties give you the advantage of consistent expenses, making budgeting simpler. If you dread having those unexpected bills pop up or aren’t necessarily the best at keeping your emergency savings account intact, monthly billing for a home warranty is a great option. 

Are home warranties worth it?

Let’s get to the crux — are home warranties worth it? Home warranties are the perfect compliment to home insurance, freeing you from the looming worry that a several-thousand-dollar bill could pop up at any moment. 

If you’re diligent about reading your policy and making sure that you have the right amount of coverage, when an inevitable breakdown happens, you’ll only need to pay the service call fee — whether you end up needing a quick fix or a whole new appliance or system. 

The key to having a smooth experience and getting your money’s worth from your home warranty policy is ensuring you comply with the maintenance requirements in your policy. Policyholders’ most frequent issue is that they don’t have routine maintenance done. When something breaks down, the warranty provider can make a case that it broke due to negligence on the homeowner’s part by not carrying out the proper maintenance. So, schedule those maintenance visits, and you can be sure your home warranty is worth it!

If you are a homeowner or are planning to buy a home, consider adding a home warranty to your to-do list. It’s a financial safety net that can shield you from unforeseen expenses related to your home’s systems and components.