Do Homeowners Need A Warranty?

It seems like no matter what you buy these days…from a vacuum to a vehicle…you get hit up for a warranty. However, you might be surprised to be offered a warranty when purchasing a home. After all, you typically have homeowner’s insurance built into your house payment depending on the policy. Why would you need a warranty? While “insurance” and “warranties” both protect your purchase, there are some major differences: Homeowners Insurance covers damage caused by outside forces such as fires, floods, hail, wind damage and even vandalism. Home Warranties provide discounted repair and replacement services on many home appliances that can go out such as washer & dryers, refrigerators and swimming pools. It also covers major components such as the AC, furnace, plumbing and electrical systems. Unlike homeowners insurance, which is usually required by mortgage companies, a home warranty is not typically mandatory. So, is it worth it? Here’s some things to think about if you’re considering a home warranty:

The Pros: 

Warranties are designed to provide protection against expensive, unforeseen repairs. A home warranty can provide a new home buyer peace of mind that they’ll be covered if any problems come up with the appliances, furnace, hot water heater, etc…Home warranties also make sense for people who aren’t handy at fixing things themselves. They won’t have to worry about tracking down a contractor when they have a problem as home warranty companies provide their own reputable contractors. A home warranty is also a good backup for folks who don’t have an emergency fund or have it pegged for other things. 

The Cons:

A home warranty will not cover items that have not been properly maintained. This can be a problem for a homeowner who purchased a home with a furnace or swimming pool that was improperly maintained by the previous owner. What is considered “improper maintenance” can be a gray area between warranty companies and homeowners. Unscrupulous companies may use the “improper maintenance” clause as an excuse to deny claims. Home warranties also come with a lot of “fine print” that should be read closely as it likely details the numerous exclusions, dollar limits per repair/per year and service fees – common to home warranties.

The Cost: 

According to Forbes, a home warranty averages less than $100 per month depending on the type of plan that is purchased. It can be paid all at once or in monthly installments. The actual cost will vary depending on whether you live in a single family home, condo, townhouse or duplex. The cost is usually not contingent on the age of the home unless it’s brand new, which will increase the cost of the coverage. Guest houses, shops or other structures on a property are usually not included in a home warranty.

The Bottom Line: 

A home warranty can be an excellent option to protect your home investment especially when paired with a good homeowner’s insurance policy. All of your bases will be covered. A note of caution: If you’ve purchased a brand new home, your appliances and home systems will  likely still be under manufacturer warranties for awhile. Before you commit to a home warranty, make sure your appliances and home systems aren’t already covered so you’re not wasting your money.