The Pros and Cons of Home Warranties

April 16, 2021

Home warranties come with a lot of perks. However, there are some distinct characteristics that homeowners should understand before they sign up for the service. These programs may or may not be the right fit for your household. Here are the major distinctions to let you make the best choice for your needs and wallet.

How a home warranty differs from home insurance

Many people think a warranty and insurance are the same things. This thought is especially true when it comes to homes and appliances. Insurance replaces things people lose when there is a major event, like a home fire or theft. A home warranty allows people to get quick, affordable service repairs for things like a leaky ice maker, a broken washer sensor, or a worn heating element.

How a home warranty works

When a person with a home warranty experiences an issue with a home appliance or system like HVAC units, they can file a claim to get a service contractor to fix the problem. The homeowner will pay a set price for the fix, no matter the cost of the repair.

Benefits of home warranties

Spending the time to research and vet every local contractor until you find the best one is time-consuming. Home warranty holders do the investigating for you and offer a list of top providers who work with them to offer service to warranty holders. Most states allow property owners to transfer this coverage to the next owner upon selling. However, it is vital to check your particular state to be sure.

Other advantages of owning a home warranty include the low replacement costs when something like a dryer or central air system fails. Homeowners do not need to put the cost on a credit card, seek a loan, or have hundreds of dollars in emergency funds available for replacing an item that stops working suddenly. Many people like the opportunity to avoid searching for replacement parts. The service provider does the work for them.

Drawbacks to home warranty services

The cost of these plans includes yearly fees and deductibles. Each time a person calls for service, there is a nominal flat-rate fee for the fix or replacement. A person can pay once a year for the coverage, or some companies will allow monthly billing for the service. Another downfall is that not every warranty company uses OEM replacements. Some companies purchase non-tested products and refurbishments.

Another problem many mention is not having the choice to pick the color and often the brand of replacement item. As long as the model and color are available and meet the same standards, the service provider can use them to fix the problem. Some repairs are not in the coverage plan. It is important for people to ask many questions about the warranty coverage and to read the fine print before purchasing these plans.

How much does it cost for a home warranty

Rates for warranty coverage will vary between states and locations. These costs can be different from one service provider to another. Most packages range between $350 to about $600 per year. People can expect to pay $50, $75, or $100 fees each time they need a contractor to come and fix a problem.

One good thing about these warranties is that they cover homes up to 5,000 square feet for the same cost. Age does not matter for coverage unless the home is a brand new build. They do not guarantee replacements to be the same product or color. Some coverage may only cover one air conditioning system, no window A/C units, and no additional buildings on the property without a separate cost. The homeowner may also need an individual plan and yearly deductible for these items.

Another thing to know is there are many levels of home warranty coverage available for purchase. Homeowners can seek a lower or higher plan depending on their needs. Choosing the right plan will require a lot of comparison shopping and itemizing. There will also be a need for a separate budget for repairs and replacements if an item does not fall into the warranty coverage. All of this information will be in the warranty contract you can read before accepting the service.

Things to ask a home warranty provider

  • Are there any discounts
  • How long is the warranty
  • Do you authorize full item replacements
  • How many times can you repair an item
  • How do you file a claim
  • Are the replacements UL inspected
  • What is the yearly deductible
  • What do you cover
  • What is not in the home warranty

When considering a home warranty, weigh the cost of saving an emergency fund and paying for the service. Home warranties do not give the homeowner full freedom of part replacement and swaps. However, home warranties save a lot of hassle and up-front cost, making them preferable.