A home warranty is a good idea if your house needs major repairs or appliances are getting old. It also makes sense if you’re a new homeowner and a home inspection shows a lot of work to be done.
When researching companies, look for sample contracts. While these won’t fully reflect the terms of your final contract, they will help you gauge coverage limits and exclusions.
1. You Don’t Need It
Home warranties can help homeowners who want to avoid draining their emergency funds for repairs that are not covered. However, annual premiums aren’t cheap, and some plans have exclusions and hidden-in-plain-sight costs that make them unaffordable. For example, many companies charge service fees for each repair call, which can easily add up over the year. Consumer reviews, websites like the Better Business Bureau and the state attorney general’s office are valuable resources to research a provider’s history and customer satisfaction ratings.
For homeowners who are diligent with their maintenance schedules, and have their appliances and systems regularly serviced, a warranty may not be necessary. Instead, those homeowners can invest the money they would have spent on a home warranty in their emergency fund or an investment account. This will provide them with peace of mind and will give them more control over their money. Similarly, those buying a new or previously owned home should carefully review a warranty contract to ensure that they understand its terms and conditions and what it will and will not cover.
2. You Don’t Want It
Many home warranty contracts have a lot of fine print and may include costs that aren’t clear or obvious, such as caps on how much the company will cover per visit or repair, or what qualifies as a replacement versus a repair. It’s important to take the time to do a deep dive into what is and isn’t covered, as well as checking out companies’ reputations.
A home warranty can be helpful for first-time homeowners, who may not be familiar with the cost and process of having systems and appliances repaired or replaced. But it’s also a good idea for new homeowners to consider setting aside money in a savings account that can be used for emergencies instead of paying for a service contract they don’t need.
3. You Don’t Have Enough Money
Unless you have a huge emergency fund and can afford to pay for major repairs, it might not be worth it to consider a home warranty. For example, if you’re buying a new construction house that comes with appliances covered by the manufacturer’s
warranty or your credit cards offer extended protection, a home warranty isn’t likely to provide enough protection.
If you do decide to purchase a home warranty, it’s important to read the contract closely and understand what is covered (and not). Home warranties often have caps on how much they will pay per visit or repair, as well as stipulations for when they will opt for a replacement instead of a fix.
You should also check the company’s reputation by asking for recommendations and reading reviews on websites such as Better Business Bureau, Yelp and Consumer Affairs. If you can, try to avoid companies with lots of complaints and warnings published by state attorneys general.
4. You Don’t Want To Pay For It
Home warranties offer peace of mind that you don’t have to drain your emergency fund if one of your appliances breaks down. They also provide a network of repair technicians who are familiar with the system or appliance in your home.
However, the annual premium, deductibles and other hidden costs add up. Many warranty plans also exclude luxury items, like smart technology and swimming pools. If you are considering a warranty, carefully review the contract for terms and conditions that include exclusions, caps on benefits and additional services such as maintenance, diagnostic and cleaning fees.
Understanding the difference between a home warranty vs home insurance is important for you to make the right decision on whether or not it is right for you.
