Home Warranties: A Good Idea?
When you think of “warranty” your mind may think of warranties for a car or a new electronic. But have you ever thought about a warranty for your home? If not, it makes a lot of sense to have one.
According to Mikey Rox at Homeside, “A home warranty, also called a home service contract, covers the repair or replacement cost of covered appliances and systems. This is an additional expense that comes out of your pocket, but it makes sense from a financial standpoint.”
It’s important to keep in mind that home warranties aren’t the same thing as insurance policies. Rather, they are more like service contracts. Like a service contract that would cover a repair for your TV, couch, or car, a home warranty is a company’s agreement to pay for fixing, or maybe even replacing things in your home.
According to Marilyn Lewis at Money Talk News, “A basic home warranty costs about $350 to $500 a year or more. A warranty typically covers kitchen appliances, plumbing, water heater, heating and electrical system components, sump pump, whirlpool tub, and ceiling and exhaust fans.”
So the real question is will buying a home warranty keep you afloat if things go wrong? Or will it be a waste of money? Today, we’re reviewing why a home warranty is a good idea, but also some cons that may come with it.
PROS
Home Warranty Helps You Save Money
If you own a home, you know that repairing things can be quite costly. No matter how much you take care of something, nothing will last forever, and eventually, you’ll end up fixing it or replacing it. The fixes or replacements can be thousands of dollars and put a real dent into your bank account since as a homeowner you are responsible for these expenses. But, what if it didn’t have to?
Mikey Rox at Homeside explains more, “A home warranty can protect your pocket and help you save on certain repairs. These warranty plans are an excellent choice if you don’t have a big budget for home repairs, or if you don’t want to drain your emergency fund on repairs. If a covered item breaks, simply call your warranty company, and the company will send a licensed technician to your home to repair the broken item. If the item can’t be repaired, the warranty replaces the item.” So while a home warranty isn’t required when owning a home, it’s recommended because it can save you a lot of money in the long run.
Home Warranty is Affordable
On top of a home warranty saving you money, they are also quite affordable, too! Consumer Reports says, “Prices may vary depending on where you live. The American Home Shield website, for example, says a plan that covers most major appliances runs about $480 annually for a home in central Ohio; one that also includes the home’s electrical and plumbing systems costs close to $600.” If you think about it, $480 a year is minimal of what you spend if you had to pay out of pocket for repairs. However, keep in mind home warranties keep up with the cost of living. If you go to a higher cost of living city such as Manhattan, they may be a bit more expensive but affordable for anyone living in that city!
Home Warranty Provides Complete Coverage
Additionally, home warranties should provide complete coverage. While these plans do not cover every single thing in your house, it does provide coverage of the home’s main items, which can save you thousands over the years. The plan covers appliances, electrical, plumbing, HVAC system, water heaters, etc. A home warranty plan does not cover roofs, floors, windows or doors, so still keep an emergency fund just in case!
CONS
Home Warranty Companies Choose the Contractors
Unfortunately, with the pros of home warranty plans, also come to a few cons. Not everything is as great as it seems all the time. One of which is that the home warranty companies choose the contractors that come out to make your repairs. This can mean one of two things: the contractors are excellent companies, or they aren’t. Regardless, you aren’t able to do the research yourself and look for those five-star reviews.
Anthony Giorgianni and Kevin Brasler at The Washington Post stated, “Once a problem has been diagnosed, the plan provider decides whether to repair it. Or the provider might replace the item, with no guarantee you will get the same brand or color, which can be an issue with appliances such as refrigerators and ovens.”
Your Claim Could Be Denied
A common problem with home warranties that many residents seem to find are claims being denied and claim caps. For example, “you need to replace an AC unit and furnace. The cost is $9,000 but the company caps its liability for any one claim at $2,000,” says Peter Warden at The Mortgage Reports.
Even more, if a home warranty company wants to deny your claim they can absolutely do so, which really just turns everything into a big disaster and leaves many frustrated.
Read the Fine Print
It’s important to keep in mind that many ads for home warranty companies are definitely better than they really are. Sales pitches can make it seem as if you’ll never pay for a home repair again…oh, but if only life was that simple. Even the most comprehensive plans include long lists of fine-print exclusions. “Most limit the companies’ financial exposure from items that break often or can be costly to fix or replace,” says Anthony Giorgianni and Kevin Brasler at The Washington Post.
So before sealing the deal on a home warranty plan, it’s important to read the fine print for any exclusions and fees.
In conclusion, a home warranty can be worth it and it can save you a lot of money down the road. However, be mindful upon signing because the things actually covered by a home warranty vary by company. And there are always going to be exceptions in the fine print.
