pros and cons of home warranty plans

Pros and Cons of Home Warranty Plans

If you’re looking for a new home or recently purchased one, you should consider a home warranty.  There’s plenty of debate as to whether investing in a home warranty is really worth the money, which can make deciding a confusing task. Let's take a look at some of the pros and cons to help you determine if a home warranty is right for you.

Pros of Home Warranties

  • Peace of Mind: Consider a scenario in which you invest your life savings in a home only to find that its refrigerator, dishwasher, and water heater are faulty. While this nightmare may not be likely, it certainly has the potential to come true. If you’re faced with expensive repairs that threaten your finances, you’ll be glad you have a home warranty plan. 

    Purchase a home warranty before such issues arise and you’ll have an insurance policy of sorts on your home's major appliances: electrical, plumbing and cooling/heating systems. 

    Examples of appliances that typically qualify include: refrigerators, microwaves, dryers, washers, garbage disposals, air conditioners, furnaces, electrical panels, faucets, indoor pipes, wiring, and ductwork. You'll have to pay a premium for the coverage but the peace of mind is priceless.
  • Coverage Flexibility: Home warranties are provided in different packages. There are some low-cost, bare-bones plans that will provide some coverage in the event that certain appliances stop working. On the other hand, you can choose the “Cadillac” style plan that covers all sorts of home items such as ceiling fans, hot tubs, pools etc.
  • The Annual Fee Often Equals the Cost of a Single Repair: Picture this, your refrigerator starts leaking out water and is failing to cool your food and beverages. You call up the maintenance man. He checks it out and concludes that it’ll require a costly repair. You can either shell out the money for the repair or, if you have a home warranty, it will be taken care of for you. More often than not, the cost of such a repair is equal to or greater than the cost of the home warranty premium. 

    The bottom line is that an investment in a home warranty makes financial sense as long as something goes wrong with an appliance or other covered items in your home throughout the year. Those who have previously owned a home can tell you, the odds are certainly in your favor.

Cons of Home Warranties 

  • It Costs Money: The biggest problem people have with buying a home warranty is that you might end up paying without receiving anything tangible in return. The typical home warranty policy runs between $200 and $500 per year. 

    There’s also a deductible fee for each service “incident” that ranges from $50 to $100. If you select one of the more expansive plans that cover a wide array of specialized items like swimming pools, hot tubs, ceiling fans, doorbells, garage door openers etc., the annual fees can top $1,000.
  • A Home Warranty Might Not be Necessary: If your home was built within the past five years or less or if you take superb care of your property you might not need a home warranty. This is because the odds of actually having to submit a claim go up as the home ages and the owner ceases to take extensive care of his property.  
  • A Home Warranty Can't Repair What is Already Broken: A home warranty won’t cover previous damages such as a weak foundation, poorly maintained systems, or compromised fixtures. This form of coverage is only for breakdowns that occur in the future, after the policy has already been put in place. Keep in mind that you’ll probably have to provide a copy of your home inspection to prove that the property's appliances and other items were functional when the home warranty was originally purchased.
Last Updated: April 04, 2024