Home warranties can be a solid investment for some, but not all, consumers
A home warranty, otherwise known as a home protection plan, is an annual service contract that offers protection for your home’s appliances and systems. These plans typically cover major appliances, such as refrigerators and ovens, and crucial systems, like wiring, plumbing, and HVAC units. Home warranties differ from home insurance plans, as the latter covers damage to the home itself.
Companies advertise these warranties as being crucial for new homeowners and providers often make bold claims as to how much money you’ll save by choosing one of their plans. Are home warranties worth it? Let’s take a look at some pros and cons so you can make the best decision for your house and your family.
Pros of Choosing a Home Warranty
Home warranty plans are so popular with new homeowners, and for good reason. They offer some unique benefits that set them apart from home insurance plans, manufacturer warranties, and other forms of home-based coverage.
Peace of Mind
This is the big one. Home warranties offer peace of mind, allowing you to live life without fretting over the general wear and tear of appliances and crucial home systems. Coverage varies from plan to plan, but most basic home warranties will cover kitchen appliances, plumbing systems, septic tanks, electrical systems, HVAC units, and washer/dryer units. Some plans will even cover pools, roofs, garage door openers, and windows. Home warranties are typically available in one-year increments, so you can purchase a plan and “set it and forget it.” Be sure to go with a reputable home warranty company to get the most out of your investment.
If something breaks in your home, you will normally have to spend a fair bit of time conducting research to find just the right contractor for your individual needs. With a home warranty, you essentially outsource this job to the provider. This can be extremely convenient for first-time homeowners who are new to the world of contractors-for-hire. Additionally, it can be a boon to folks who have just moved to a new city, as they won’t yet have connections with reputable service technicians. Of course, you should still do some research before buying a plan to make sure the provider employs reputable contractors. You can check on a contractor by looking them up on the Better Business Bureau, giving them a call, or contacting some of their references.
A home warranty premium is a monthly or annual fee you will pay for coverage. Luckily, these plans are relatively inexpensive, coming in at around $300 to $600 per year or $25 to $50 a month. When you consider the cost of plumbing repairs, HVAC repairs, or simple appliance repairs, paying an annual premium for a home warranty starts to make a whole lot of sense. After all, a qualified plumber costs $45 to $200 per hour, as an example.
Most home warranty plans are transferable. What does this mean? If you sell your house, the warranty will transfer to the new owner. There may be a nominal transfer fee involved of $25 or thereabouts, so read the fine print if you are planning on putting your home up for sale. Also, be sure to read the plan thoroughly to ensure it is transferable in the first place.
Cons of Choosing a Home Warranty
Of course, not all is sunshine and roses when it comes to home warranty plans. There are some things to look out for when choosing a provider and some cons that are inherent to the entire industry.
Home warranty providers are, first and foremost, businesses that make money by not covering claims. Many home warranty contracts include complicated language that can be tough for the layperson to understand. In other words, many coverage exclusions could be hiding in plain sight. Some plans issue arbitrary claim caps. For instance, your furnace breaks down and it costs $5,000 to replace. The fine print of your contract dictates that any single claim is capped at $2,000. You’ll be out $3,000 plus the cost of the plan. The provider could refuse to replace broken items, stopping coverage at repairs. The contract may even ban you from taking the company to court if you feel dissatisfied.
Exercise caution before signing anything and don’t be afraid to ask your provider representative numerous questions until satisfied by the answers.
Service Call Fees and Hidden Costs
In addition to the annual premium, most plans will feature a number of hidden costs that could add up over time. Just as with other types of insurance and warranty plans, there will be a deductible you will have to pay out before any coverage kicks in. Additionally, each service call will typically include a service fee, regardless of the final cost to fix your issue. Many companies also charge a cancellation fee, forcing consumers to stick around for the full year. Read the fine print and don’t be afraid to advocate on your behalf when necessary.
Home warranty companies typically rely on a few in-network contractors to perform repairs and replacements. If you experience a sudden emergency, the regular technicians may not be available that day or even within the week. Additionally, you can expect fairly long wait times when it comes to claims being processed, filed, and paid out. Speed up the file-claiming process by signing up for an online account with the provider instead of using their phone system.
You May Not Need One
Before you sign up for a home warranty, check on the status of your other insurance and warranty plans. Newly built homes will come with brand new appliances and systems that include a manufacturer’s warranty of one to three years. Credit cards can also offer protection for appliances and home systems. Finally, builders will usually include a warranty on a newly constructed house that will cover plumbing, electrical systems, HVAC units, and other necessary components of a home. Some governmental agencies, such as The Federal Housing Authority, require builders to buy a third-party warranty as a way to protect buyers. Between the builder’s warranty and the manufacturer’s warranties, all of your coverage needs may already be met.
How to Know if a Home Warranty Is Worth It
Whether or not you find a home warranty to be worth it depends on many factors, including your appliances and the home warranty itself. If you seek out the best home warranty possible, catered to your home and its needs, and you’re looking for a little extra piece of mind, these warranties can be worth it. However, if in your research you find that you already have plenty of protection in the form of appliance warranties and insurance, you may not want to opt for this extra service.