Home Warranty Pros and Cons

A home warranty offers protection against appliance and home system failures. These plans can offer peace of mind, but they also come with premiums and coverage limits. Let’s take a closer look at home warranty pros and cons, so you can make an informed decision about whether you need one.

What Is a Home Warranty?

A home warranty offers protection when an appliance or home system breaks down and covers events and items that home insurance doesn’t. Home warranty companies offer multiple home warranty plans to choose from, depending on what you need covered.

While these plans can lead to covered repairs, they also come at a cost and don’t always cover everything you might think they do. A home warranty provider can walk you through different plan options and their associated costs so you can determine if a home warranty is worth it.

Pros of Home Warranties

Home warranty plans can offer peace of mind knowing that you won’t necessarily have to cover the full cost when a home system like HVAC or a water heater breaks down. Most home warranty companies offer multiple plans, so you can pick the one that fits your needs, and if the plan doesn’t cover everything you want, there are also add-on coverage options to choose from.

Covers the Cost of Repairs or Replacement

Repairing or replacing appliances and home systems can be costly and may not fit into everyone’s budget. A home warranty plan will cover the cost to repair or replace covered items after you pay the plan’s service fee. 

Multiple Plans to Choose From

Most home warranty companies offer different plans to fit each customer’s needs. Plans vary from company to company, but in most cases, a basic plan covers either specific appliances or home systems.

Home system plans cover heating and air conditioning, ductwork, plumbing, electrical, and water heaters. Appliance plans cover washers, dryers, garbage disposals, ovens, garage door openers, and more. Check the details of each plan and make sure it covers everything you’re looking for. 

Additional Coverage Options for Plan Customization

Standard home warranty plans cover items you would likely expect, like HVAC systems and refrigerators. However, not all homes are the same, so home warranty companies offer a range of add-on coverages, such as:

• Pools and spas

• In-fridge ice makers

• Electronics protection

• Pest control

• Sump pumps

• Accessory dwelling units (ADUs)

• Power washing

Each home warranty company offers its own selection of add-ons, so you can customize your plan. Each add-on comes at an additional cost.

Cons of Home Warranties

At first glance, home warranties sound like a good deal, but they come with service fees (similar to a deductible) and premiums, and they may not cover all breakdowns or damage. They also come with coverage limits, which may not cover the entire cost of repairs or replacement systems.

May Not Cover All Breakdowns or Damage

If you’re considering purchasing a home warranty plan, keep in mind that the plan may not cover all the potential breakdowns or damage to home appliances or systems. Make sure to read the agreement carefully and make note of anything that isn’t covered. That way, if damage does occur, you’ll be prepared for the expense.

Coverage Comes With Premiums and Service Fees

Home warranties cost an average of $1,100 annually, with plans ranging between $250 and $1,900. When you sign up for a home warranty plan, you often have the choice of service fees, which are between $50 and $150. To determine if a home warranty is right for you, weigh the cost of the plan versus the cost of home repairs and what you’re able to cover out of savings or your monthly budget.

Coverage Limits May Apply

Coverage limits are the repair or replacement costs that the plan covers. When an appliance or home system breaks down, the plan may not cover the entire cost based on the coverage limits. For example, some plans include a $5,000 coverage limit for an air conditioning or heating system.

Is a Home Warranty Right for You?

Determining whether a home warranty is right for you depends on a few factors. When weighing the pros and cons, consider: 

• Emergency fund: If you have an emergency fund that will cover the cost of ongoing repairs and occasional replacements, you might decide not to purchase a home warranty. If you know you won’t be able to cover a major home breakdown and feel more comfortable with a monthly payment, a plan might be right for you.

• Home’s age and condition: An older home with aging appliances will likely come with higher costs as systems and appliances start to fail. If this is the case, a home warranty can help you avoid high costs when it’s time to repair or upgrade systems like plumbing.

• Contractor choice: Some home warranty companies allow you to choose your own contractor, while others have a network that you have to choose from. If you have a favorite contractor or handyperson, you might want to skip the warranty.

• Reviews: Before signing a home warranty agreement, read reviews from other homeowners with experience with the company. Some home warranty customers have a great experience, while others don’t, so getting insight from others can help you make your choice.

• Selling the home: In some home sales, the seller will pay for the home warranty to offer additional protection for the buyer. For example, a home warranty can cost the seller around $1,000 for a year of coverage after closing. If you’re selling in a buyer’s market, you may want to purchase a home warranty to entice buyers.  

Before jumping into a plan, research home warranty companies near you to see what they offer and how much the plans cost. Call the company and inquire about details like their coverage limits, premiums, fees, and contractors.