Do You Need a Home Warranty?

When you purchase a home, new or pre-owned, you may be offered a home warranty. Home warranties are typically used as safety nets to help with unforeseen and pricey home repairs. While they offer financial protection, home warranties are not a catch-all to every maintenance expense. Here, we’ll share what a home warranty typically covers, and the pros and cons to help you decide if it’s right for you.

What is a Home Warranty?

home warranty service provider

A home warranty provides discounted prices on services to make major home repairs, such as heating, HVAC, plumbing, electrical systems, and sometimes major appliances. To offer these discounts, warranty companies work with approved service providers; when a homeowner needs a repair made, the warranty company will send one of these service providers to examine the problem and complete the work if necessary. Because the homeowner has already purchased a warranty, they will only pay a small service fee to the service provider upon repair completion. While homeowner’s insurance will cover major perils to the home such as natural disasters, fire, crime, and structural mishaps, a home warranty can help with covering the cost of repairing the rest.

How Much Does a Home Warranty Cost?

Most home warranty companies will offer a basic coverage policy, but homeowners have the option to purchase additional coverage. Home warranties can cost several hundred dollars a year upfront, and are typically purchased upon purchasing the home. This cost can vary depending on the property type (single-family home, condo, townhome, condo, etc.) and the additional coverages added. In addition to a yearly price, homeowners must also pay a service fee, which can cost anywhere from $60-$100 each time they request a service provider to examine the home. Just like other home policies, just because you have a home warranty does not mean you will never pay for a repair. Some services are not covered by a home warranty, and a warranty has the authority to deny a claim, leaving the homeowner responsible for the entire cost of the repair.

home warranty price

What are the Benefits?

home warranty benefits

Having a home warranty can provide peace of mind for unforeseen repairs and can act as a buffer for homeowners that do not currently have an emergency fund or excess savings for repairs. It can also assist homeowners that are not handy and don’t know of any contractors to call when they have an issue. Home warranties are especially helpful for providing a sense of security for home buyers upon purchasing a home they have limited information about. They are helpful for home sellers as well, by protecting them from potential buyer complaints regarding problems or defects after the sale.

What are the Drawbacks?

One of the major drawbacks of home warranties is that the coverage is often a gray area when it comes to maintained items and appliances. Typically, a home warranty will not cover items that have been properly maintained, however the definition of “properly maintained” can vary, which causes disagreements between warranty companies and homeowners. In addition to difficult gray areas, home warranties also have exclusions that limit the number of dollars covered by repairs and the number of repairs made per year. Finally, if you find that your home does not need a major repair within the year you purchased a home warranty, you will find yourself out  several hundred dollars. 

denied warranty claim

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