Are Home Warranties Worth It? Do You Need a Home Warranty?
When it comes to owning a home, unexpected repairs and replacements are inevitable. Appliances break, systems fail, and the cost of repairs can quickly add up. That's where a home warranty comes in. But is a home warranty worth it? In this comprehensive guide, we'll explore the ins and outs of warranties, including what they cover, how they work, and whether they are a worthwhile investment for homeowners and renters alike.
What is a Home Warranty?
A home warranty is a renewable home service plan that provides discounted repair and replacement services for covered household appliances and systems. It is important to note that a warranty is different from homeowners insurance. While homeowners insurance protects against damage to the structure and personal property caused by events like fire or theft, a warranty focuses on the repair and replacement of appliances and systems due to normal wear and tear.
What is Covered in a Home Warranty Policy?
The coverage provided by a warranty can vary depending on the type of plan you purchase. Generally, most warranty plans cover major components of large home systems such as HVAC, plumbing, and electrical. Appliances like washers, dryers, refrigerators, and stoves may also be covered. It's important to carefully review the coverage details of a specific warranty policy to determine what is included.
Some warranty companies also offer optional add-on coverage for additional items such as spas, second refrigerators, swimming pools, pumps, and septic systems. These optional coverages can be beneficial for homeowners who have specific needs or want extra protection for their home's systems and appliances.
How Does a Home Warranty Work?
A home warranty is a service contract typically offered for a monthly or annual fee. When a covered appliance or system breaks down, the homeowner can file a claim with the warranty company either online or by contacting their customer service team. The warranty company will then connect the homeowner with an approved service provider who will assess the problem and perform the necessary repair or replacement.
It's important to note that there's usually a fixed service call fee and annual coverage limits for repairs. These fees and limits can vary depending on the company and the specific plan chosen. Homeowners should carefully review the terms and conditions of their policy to understand the costs and coverage limits to understand when a home warranty can help.
What's Not Covered by a Home Warranty?
While warranties provide coverage for a wide range of appliances and systems, there are certain items that are typically excluded. Some common exclusions include:
Structural issues in foundations, walls, paint, and flooring
Commercial-grade equipment or systems
Pre-existing conditions
Normal wear and tear
Rust, corrosion, and sediment problems
Improper maintenance, installation, design, manufacturer defects, or previous repairs outside of the contract
Detection and removal of asbestos, radon gas, and mold
Building and zoning code violations
It's important to carefully review the contract to fully understand what is and isn't covered.
Difference Between a Home Warranty and Homeowners Insurance
While warranties and home insurance are both designed to protect homeowners, they cover different aspects of home ownership. Homeowners insurance primarily focuses on protecting the home and personal possessions from damage caused by events like fire, theft, or natural disasters. On the other hand, a warranty provides coverage for the repair and replacement of appliances and systems due to normal wear and tear. Homeowners should consider both types of coverage to ensure comprehensive protection for their home.
When do You Need a Home Warranty?
A warranty can be worth it for homeowners in several situations. Here are some instances where getting a home warranty might be a good idea:
Older Homes: If you own an older home with aging appliances and systems, warranties can provide peace of mind and financial protection against potential repair or replacement costs. Particularly if the condition of your home has lacked continual maintenance.
First-Time Homebuyers: For first-time homebuyers, a warranty can provide comprehensive coverage for all of their systems and appliances, helping them navigate the challenges of homeownership with added confidence. This is especially true since many home buyers waived home inspections in hot real-estate markets.
Selling Your Home: If you're a home seller, offering to purchase a home warranty for potential buyers can be an attractive selling point. It provides them with assurance that they won't be burdened with unexpected repair costs in the early years of homeownership.
Unknown Repair Technicians: If you're new to an area and don't have a network of trusted repair technicians, a home warranty provider has access to pre-approved service providers, saving you the hassle of finding reliable professionals on your own.
While a warranty can be a valuable investment in these situations, it's important to carefully consider your specific needs and circumstances before purchasing a policy.
When is the Home Warranty Cost Not Worth It?
While a warranty can provide peace of mind and financial protection for homeowners, there are situations where it may not be worth it. Here are some instances where a warranty may not be necessary:
New Construction Homes: If you're purchasing a newly built home, many appliances and systems will already be covered by manufacturer warranties. In this case, you may duplicate coverage you already have.
Well-Maintained Homes: If you have diligently maintained your appliances and systems and they are in good working condition, the need for a warranty may be reduced. Regular maintenance can help prevent major breakdowns and extend the lifespan of your appliances and systems.
Limited Budget: If you have a limited budget and the cost would strain your finances, it may be more prudent to focus on building an emergency fund to cover unexpected repair costs.
Benefits of a Home Warranty
Despite the considerations mentioned above, a warranty can offer several benefits to homeowners. Here are some advantages of having a warranty:
Peace of Mind: Rest easy knowing that you won't be caught off guard by the expensive cost of repairing or replacing a covered home system or appliance failure.
Access to Trusted Service Providers: Many home warranty companies have a network of pre-approved service providers, saving you the time and effort of finding reliable technicians on your own.
Convenience: With warranty protection, you have just one point of contact for all your covered repairs. You don't have to spend time researching and contacting multiple contractors for different systems or appliances.
Cost Savings: Even with the cost of the premium and service call fees, the potential savings on major home systems and appliances repair costs can outweigh the expenses. It's important to compare the cost of the warranty to the potential costs of repairs to determine if it is a cost-effective option for you.
How to Choose the Right Home Warranty Company
When selecting a home warranty company, it's important to consider a few key factors:
Coverage: Review the coverage options offered by different companies to ensure they align with your specific needs. Consider the items you want to be covered and any optional add-on coverage available.
Cost: Compare the premiums and service call fees of different home warranty plans. Factor in the coverage limits and determine if the cost is reasonable in relation to the potential savings.
Reputation: Research the reputation of the home warranty company. Read customer reviews, check if they are accredited by the Better Business Bureau, and look for any complaints or legal issues.
Customer Service: Consider the responsiveness and quality of customer service provided by the home warranty company. You want a company that is easy to reach and will promptly address any concerns or issues you may have.
Contract Terms: Carefully review the terms and conditions of the home warranty contract. Understand the coverage limits, exclusions, and any requirements for maintenance or documentation to ensure you can fully utilize the benefits of the warranty.
Best Home Warranty Companies
To help you in your search for a reputable home warranty company, here are some top-rated companies to consider:
American Home Shield
American Home Shield (AHS) is a renowned home warranty company that offers comprehensive coverage for major systems and appliances. With three coverage plans - ShieldSilver, ShieldGold, and ShieldPlatinum - AHS provides extensive protection for your home. The plans cover heating, cooling, electrical systems, and appliances, with varying coverage caps and additional benefits based on the selected plan. AHS also stands out by covering rust, corrosion, sediment damage, and items with preexisting conditions.
Choice Home Warranty
Choice Home Warranty offers coverage for major appliances and systems such as heating, air conditioning, plumbing, and electrical. With a network of professional technicians and a 24/7 customer service team, Choice Home Warranty aims to provide efficient and reliable service to its customers. They have different plans to suit individual needs and offer a satisfaction guarantee.
Liberty Home Guard
Liberty Home Guard is a well-regarded provider of warranty protection that provides personalized plans to suit specific requirements. Their coverage encompasses essential household appliances, systems, and additional options such as electronic devices, swimming pools/spas, separate guest units, septic pumps, and well pumps. Liberty Home Guard empowers customers to tailor their service call fees, enabling them to adapt their monthly premiums according to their financial situation.
Select Home Warranty
Select Home Warranty has a reputation for offering cost-effective packages and extensive protection. Their packages encompass a diverse selection of appliances and systems, such as plumbing, electricity, heating, and cooling. Additionally, Select Home Warranty allows customers to opt for additional coverage for well pumps, pools, and spas. By utilizing a team of skilled service technicians, they guarantee quick and effective repairs.
AFC Home Club
AFC Home Club provides a range of options for coverage, which include plans for systems, appliances, and a comprehensive combination plan. These plans provide protection for important household systems such as heating, cooling, plumbing, and electrical, as well as major appliances. AFC Home Club also offers adaptable service call fees and the opportunity to add coverage for items like roof leaks and septic systems.
First American Home Warranty
First American provides extensive protection for major systems and appliances. Their packages include basic coverage for things like plumbing, electricity, and heating, along with the choice to add coverage for extra items like pool and spa equipment. First American also offers a generous coverage limit, guaranteeing you are safeguarded in case of expensive home appliances and systems failures.
Cinch Home Services
Cinch Home Services provides tailored plans to suit your particular requirements. Their coverage encompasses significant systems and appliances, with the choice to add extras such as electronics and pool equipment. In addition, Cinch protects against undisclosed preexisting conditions, items affected by rust and corrosion, and items that have been incorrectly installed or altered.
2-10 Home Buyers Warranty
2-10 Home Buyers Warranty is dedicated to offering protection specifically designed for individuals purchasing new homes. Their policies cover essential systems and appliances, ensuring that purchasers are safeguarded against unforeseen expenses for repairs during their initial year of owning a home. 2-10 Home Buyers Warranty provides the convenience of adjustable service call fees and a guarantee on workmanship for a period of 30 days.
Remember to carefully compare the coverage, cost, and reputation of different companies to find the best fit for your needs.
What is the cost of a home warranty plan? The cost of a plan can vary depending on factors such as coverage level, location, and the company you choose. On average, monthly premiums range from $25 to $50.
What appliances and systems are covered? Coverage typically includes home repair for major home systems such as HVAC, plumbing, and electrical, as well as appliances like washers, dryers, refrigerators, and stoves. Optional add-on coverage is available to cover the cost to repair for items like spas, pools, and septic systems.
What is the difference between a warranty and homeowners insurance? Homeowners insurance policies primarily cover damage to the structure and personal property caused by events like fire or theft. A protection plan, on the other hand, focuses on the repair and replacement of home systems and appliances due to normal wear and tear.
When is it a good idea to buy a warranty? It's a good idea if you own an older home, are a first-time homebuyer, plan to sell your home, or are new to an area and don't have trusted repair technicians.
What is covered by a home warranty versus what is covered by homeowners insurance? Home warranties cover the repair and replacement of appliances and systems due to normal wear and tear, while homeowners insurance covers damage to the structure and personal property caused by events like fire or theft.
Conclusion: Pros and Cons of Home Warranties
In conclusion, a warranty can provide homeowners with peace of mind and financial protection against unexpected repair or replacement costs for their appliances and systems. While warranty coverage may not be necessary for everyone, it can be a valuable investment for those with older homes, first-time homebuyers, or those looking to offer additional protection when selling their home. When considering warranty protection, carefully review the coverage, cost, reputation of the company, and read the fine print to ensure you choose the right plan for your needs. With the right warranty, you can have confidence knowing that your home's appliances and systems are protected.
