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How To Decide Whether Home Warranties Are Worth It?
PUBLISHED: Feb 16, 2021 • 6 MINS READ
The last thing any homeowner wants is an expensive home system like the air conditioning breaking down. It can burn a hole in the wallet to get such costly repairs or replacements of home systems and appliances and most people don’t have such large amounts readily available at all times.
A home warranty can serve as a key component of a household financial protection plan by covering mechanical breakdowns due to normal wear and tear. It’s a small investment that can potentially cut down the hassle involved in getting home systems and appliances up and running.
To help you decide whether home warranties are worth it for you, we have detailed the different types of home warranties and the various factors to consider when deciding the right plan.
What is a Home Warranty?
A home warranty is a service agreement where the customer pays a small premium to cover for repairs and replacements of home systems and appliances wearing out mechanically. Whenever a service request is filed, the customer pays a small deductible as a service fee, and the company pays the cost of the work done. Home warranties significantly reduce out-of-pocket expenses incurred as a result of unexpected repairs and replacements of covered conditions.
Different Types Of Home Warranties
There are different types of home warranty protection plans as per users’ needs. Home warranty plans are designed to suit the needs of realtors, homeowners, buyers & home sellers, landlords, and tenants.
Realtor Plans
The realtor plans or the real estate home warranty plans are designed to suit home buyers or sellers’ needs. The coverage of home systems and major appliances remains similar between all plans, but realtor plans typically include:
Plumbing Upgrade
HVAC Upgrade
Appliances Upgrade
Permit Fees
Code Violations
Improper Installation/Repair/Modifications
Mismatched Conditions
Rekey service
Geothermal Heat Pump
These items may require coverage when a home is on the market for a new buyer. The contracts are transferable and reduce the liability of the previous owner.
Homeowner Plans
The conventional home warranty plans are targeted towards homeowners. The plans are generally organized as per extent of coverage from those that cover a handful of core systems and home appliances to comprehensive plans covering the entire home’s devices.
Landlord Plans
Most home warranties are suitable for owners of rental property. Based on the agreement drawn between the landlord and the tenant, sometimes the landlord bears the responsibility for the maintenance of systems and appliances. Hence, a home warranty policy can reduce the hassle of finding a repair technician to send over.
The coverage tends to remain the same for homeowner plans, but owners have to get individual policies for multiple units.
How Does A Home Warranty Work?
STAGE❯❯01
Choosing and Purchasing a home warranty
The first step in purchasing a home warranty is to find out all the top home warranty companies that offer the best plans. HomeWarrantyReviews.com is designed to help you do just that. We are a one-stop destination for all the information about price estimates, coverage, claims process, and the nitty-gritty that you need for your home warranty research.
You’ll be able to convert it into a purchase if it appeals to you. You must carefully read the service contract before you pay for anything.
STAGE❯❯02
Something breaks down
When an appliance or system stops working, first check if it’s covered. If so, you have to ensure that no one touches or repairs it until the home warranty company has been notified.
STAGE❯❯03
Filing a Service Request
Call the home warranty company, and their customer service team will schedule a repair visit from a contractor. You can also do this online by logging into your home warranty account.
STAGE❯❯04
Payment
You may have to pay the deductible beforehand to some companies, while others ask you to pay the service contractor directly.
Sometimes the company may authorize you to hire a contractor of your choice. Then, they may want a copy of the invoice from your payment and reimburse you.
Do Both New And Older Homes Need A Warranty?
Older homes can benefit from having a home warranty protection plan to take care of worn out home systems and appliances. After appliances have turned 7-8 years old, they start breaking down due to age-related mechanical issues. Items like the HVAC and electrical systems that are always running are particularly prone to breaking down.
Newly constructed homes may not require a home warranty plan as most home systems and appliances would have their original manufacturer’s warranty. If there are items that aren’t covered well, the homeowners can choose a plan that allows them to tailor coverage.
Pre-owned homes over five years old can benefit from home warranty coverage, especially when the owner wants to sell the home. They increase the selling price of the property and help to close the sale faster. The age of the home is a deciding factor in considering whether home warranties are worth the money.
Pros And Cons Of A Home Warranty
Here are some of the key home warranty benefits and drawbacks you can expect from home warranties:
Pros
Cons
Peace of mind
You may not end up using your home warranty right away, but purchasing one can offer a sense of reassurance. You will get financial security in the event of unforeseen breakdowns and access to vetted and skilled technicians.
Policy Exclusions
Home warranties cover the breakdown of covered home appliances and systems under certain circumstances. Any failure caused by natural disasters, hazards, or neglect does not find coverage under home warranty policies.
A Great Way To Save
Kitchen appliances, plumbing, and electrical systems tend to break down or fail more often when compared to others. Even a basic home warranty covers the repair and replacement costs for these items. It is a great option that can help you avoid spending thousands of dollars.
May Not Be Of Use
A well-maintained home of fewer than five years may not end up facing any significant repairs. Taking out a home warranty in such a situation may not be the most economical decision.
Adds Value To Your Home
Home warranties provide more value to your home on the market. Since home warranties are transferable in some cases, buyers favor houses equipped with a home warranty. It also goes on to instill a sense of trust in buyers about the home’s condition.
No Choice in Service Provider
You may not be able to choose the handymen replacing your appliances or systems. Some home warranty companies also repair or replace only certain components of your system or appliance. There are a few companies that let you choose a technician.
All Round Protection
When you purchase your home warranty policy, you receive coverage for an entire year. All the systems and appliances listed in your contract get covered under the policy. AHS offers an Electronics Plan that covers non-standard items.
Pre-existing Conditions
Depending on a particular company, older devices with pre-existing conditions may or maybe not be covered under the contract. Read the agreement carefully before signing up.
Discounts
Home warranty companies offer discounts to customers on many occasions. They are offered at the time of buying a policy or during the coverage period. Some companies have special programs for customers who want to upgrade their appliances.
Limitations of Device Coverage
If an item is recently repaired or replaced and starts malfunctioning again, the home warranty company may not fix the device. Check your contract to understand coverage caps.
Easy access to a licensed technician
When your covered appliance or system breaks down, you don’t need to go and search for a licensed and insured service technician. Home warranty companies have a vast network of contractors. When you file a claim a licensed, local, and skilled technician is assigned to fix the issue.
Specific Parts are Covered
Not all parts of your systems and appliances get covered under the home warranty policy. Only specific components of an item are covered under a home warranty contract.
Continuous assistance
Regardless of the time, location, or the weather conditions, the customer representatives of the home warranty company will offer you 24/7 end-to-end, uninterrupted, on-call services.
Repairs and Replacements
If a particular device cannot be repaired, it is replaced with a new system or appliance. But this depends on your device’s condition and an assessment made by the company.
Easy Transfers
If you sell your home, you can transfer the warranty to the next owner with no hassle or any kind of cancelation and repurchase issues. The warranty policy is usually associated with the property in question.
Coverage Exclusions
Improper maintenance, breakage due to rust and corrosion, and accessory parts are usually not a part of the warranty coverage.
Pros
Peace of mind
You may not end up using your home warranty right away, but purchasing one can offer a definite sense of reassurance. You can get financial security in the event of unforeseen breakdowns and access to vetted and skilled technicians.
A Great Way To Save
Kitchen appliances, plumbing, and electrical systems tend to break down or fail more than others. Even a basic home warranty covers the repair and replacement costs for these. It is a great option that can help you avoid spending thousands of dollars.
Adds Value To Your Home
Home warranties add value to your home on the market. Since home warranties are transferable in some cases, potential buyers tend to favor houses equipped with a home warranty. It also goes on to instill trust in buyers about the home’s condition.
All Round Protection
When you purchase your home warranty policy, you receive coverage for an year. All the systems and appliances listed in your service contract get covered under the home warranty policy. AHS offers an exclusive Electronics Plan that covers non-standard items.
Discounts
Home warranty companies offer customers discounts on different occasions. They are generally offered at the time of buying a policy or during your coverage term. Some companies even have special programs for customers wanting to upgrade their appliances.
Easy access to a licensed technician
When your appliance or system breaks down, you won’t have to search for a licensed and insured service technician. Home warranty companies have a network of contractors. When you file a claim, a licensed, local, and skilled technician is assigned to fix the issue.
Continuous assistance
Regardless of the time, location, and weather conditions, the home warranty company representatives will offer you 24/7 end-to-end, uninterrupted, on-call services.
Easy Transfers
If you sell your home, you can transfer the policy to the next owner with no hassle or cancelation and repurchase problems. The warranty is associated with the property in question.
Cons
Policy Exclusions
Home warranties cover the breakdown of appliances and systems under certain circumstances. Failure caused by natural disasters or hazards does not find coverage under home warranty policies.
May Not Be Of Use
A well-maintained home of fewer than five years may not end up facing any repairs. Taking out a home warranty in such a situation may not be the most economical option.
No Choice in Service Provider
You may not be able to choose the handymen replacing your appliances or systems. Some home warranty companies also repair or replace only certain components of your system or appliance. There are a few companies that let you choose a technician.
Pre-existing Conditions
Depending on a particular company, older devices with pre-existing conditions may or maybe not be covered under the contract. Read the agreement carefully before signing up.
Limitations of Device Coverage
If an item is recently repaired or replaced and starts malfunctioning again, the home warranty company may not fix the device. Check your contract to understand coverage caps.
Specific Parts are Covered
Not all parts of your systems and appliances get covered under the home warranty policy. Only specific components of an item are covered under a home warranty contract.
Repairs and Replacements
If a particular device cannot be repaired, it is replaced with a new system or appliance. But this depends on your device’s condition and an assessment made by the company.
Coverage Exclusions
Improper maintenance, breakage due to rust and corrosion, and accessory parts are usually not a part of the warranty coverage.
How To Choose & Buy A Home Warranty Plan?
Keep the following aspects of the purchase strategy in mind:
Price
The home warranty coverage must reduce the expenses of repair services and save money. If the price of the plan you bought is higher than the cost of coverage, the home warranty plan will not be a prudent choice.
Coverage
This is the most important thing to look for in a home warranty. The household systems and appliances that are most likely to wear out should be covered. You should also understand the exclusions well.
Research
There are many companies with almost identical residential warranty plans. It would help if you looked at their service delivery record by reading reviews.
How Much Does A Home Warranty Cost?
Home warranty companies offer a myriad of plans, starting from the basic to the higher end ones. The average basic home warranty plan starts from $350-$700 yearly, while a monthly plan may cost you anywhere between $25-$50. Some of the more expensive plans can also charge thousands of dollars for their extensive coverage options and offer much higher coverage caps to their repair costs.
Apart from the premium, you will have to pay a deductible to the service technician whenever your household’s systems or appliances fall into disrepair. This service fee can also range from $50-$200. If you’d like to extend your coverage to include add-ons, you’d have to pay an additional price. This expense may cost you a few hundred dollars extra depending on the items you choose.
Various factors like the size of the house you live in, the company, and location affect the prices of home warranty plans. Read our guide on home warranty costs to learn more.
Here are the price variants for three of our top companies.
A home warranty is a protection plan for major household systems and appliances. You don’t need to undergo a home inspection or provide maintenance records while purchasing a home warranty coverage. Some home warranties ensure that your home will also be covered regardless of its age or any pre-existing conditions. Home warranty companies have plans that cover systems or appliances or a combination plan that covers both.
The coverage may differ on the company or plan you choose, but an appliance plan typically covers – Kitchen Appliances like Dishwashers, Ranges/Oven/Cooktops, Refrigerators, Built-in-Microwave, etc. Garage Door Openers, Garbage Disposal, Attic Fans, Washers/Dryers, and more.
When they break down, major home systems can be quite a costly affair to repair or replace. A general systems plan usually includes – Plumbing, Central Air Conditioning, Central Vacuum, Ductwork, Water heaters, Sump Pumps, Re-key services, and more.
A combination of the appliance and system plan can offer more coverage to your home. Though it covers both appliances and systems, the combo plan may not offer the comprehensive coverage you are looking for. You can choose to get add-ons at an additional cost that home warranty companies offer in such a scenario. The most common add-ons include – Pool and Spa, Water Softeners, Guesthouses, Septic Systems, Extra Air Conditioners, Extra Refrigerators and Freezers, and more.
Coverage Limitations
Home Warranties do offer vast and comprehensive coverage options to your home. However, there are some limitations and exclusions to a home warranty policy.
Home warranties do not cover appliances or systems that fall into disrepair due to improper maintenance or wilful neglect and misuse. They also do not cover damages incurred due to natural disasters, acts of God, or accidents.
Home warranty companies also have a limit to the amount they offer for repair or replacement costs. Coverage caps differ for each appliance or system, but there is an aggregate limit to each plan that a home warranty company offers. Any extra costs will have to be out of the homeowner’s pocket.
A home warranty plan can be an excellent investment for someone with an older or pre-owned home with aging systems and appliances likely to stop working with age-related wear and tear. Homebuyers have no idea how the previous owner has cared for the household appliances, and a home warranty may be helpful, especially when the purchase is already depleting their budget.
However, you must carefully read the service contract and remember that appliance maintenance is key to successful home warranty claims processing. It’s always good to have an emergency fund for unforeseen expenses, even with a home warranty to save the budget.
Frequently Asked Questions (FAQs)
What is the best home warranty?
Home warranty companies offer coverage to most of the appliances and systems in your home. You can also choose to get coverage for uncovered items at an additional cost. The best-reviewed home warranty companies in the market offer comprehensive coverage plans, easy claims process, trained and skilled technicians, and more to gain an edge in the market. While one company may offer competitive prices, the other companies may excel in other aspects, and such the answer can’t be unanimous. However, it comes down to which home warranty company best serves your home’s needs.
Companies like Choice Home Warranty, American Home Shield, ServicePlus Home Warranty are great options to look at as they strive to offer the best deals and services.
What’s the difference between a home warranty vs. home insurance?
Home warranties are annual service contracts covering repair costs or replacing the major appliances and systems in your home. The coverage kicks in when a covered item breaks down due to normal wear and tear.
On the other hand, homeowners’ insurance covers the structure and the personal property of the insured. The insurance companies are liable to cover damages during natural disasters and even burglaries, unlike home warranties.
While both home warranties and homeowners insurance have options to pay an annual or monthly premium, the deductibles for each vary. The key differences between the two are the extent of their coverage they provide and pricing. If you purchase both together, they can protect your home’s interior and exterior aspects.
What is a home warranty policy?
A home warranty policy is an annual service contract that offers protection to the appliances and systems in your home. Home warranties offer plans that cover items in case of breakdowns due to general wear and tear. As such incidents come unannounced, having a home warranty can save you from unexpected and often expensive repair or replacement costs.
You can opt to include more items in your coverage at an additional cost. The covered items are repaired when they break down after placing a claim.
What is a trade call fee?
A trade call fee or a service call fee of a home warranty covers your home warranty company’s labor cost. It is an affordable flat rate that you pay to the contractor or technician to assess and repair your damaged item. The average trade call fee in the home warranty industry ranges from $60-$100.
Is there a deductible cost incurred on home warranty plans?
Home Warranties do have deductibles. They come in the form of service call fees that you pay to the service technician. If you choose to pay a higher service call fee, you can pay a lower annual premium.
Buying a house is probably the most significant financial investment in your life, leaving you to question the value of every purchase you make afterward. A home warranty can serve as a source of financial protection for the appliances and systems in your home. Unanticipated breakdowns can be an onerous monetary burden as repairs or replacements tend to be expensive. A home warranty covers the cost of repair or replacement and can help in cost savings in the long run.
Is offering a home warranty to a buyer worth it?
If you are a homeowner looking to sell your home, getting a home warranty plan will attract more prospective buyers. Some home warranties are transferable to the next homeowner, and a buyer is likely to appreciate its addition with the purchase of a home.
There is also the added benefit of the home getting a competitive edge in the market if you are selling a house with a home warranty. Offering a home warranty will also instill a sense of confidence in the purchase as they can stop fretting about any likely repair costs in the immediate future.
Pros
Peace of mind
A Great Way To Save
Adds Value To Your Home
All Round Protection
Discounts
Easy access to a licensed technician
Continuous assistance
Easy Transfers
