A home warranty is a type of protection that can help you pay for routine repairs or replacements for your home’s major systems and appliances. Many homeowners wonder if a home warranty is really worth the money — or if they’d be better off saving in their emergency fund. While this can be an invaluable protection, you’ll need to know exactly what is and isn’t covered on your plan before you buy.
What is a Home Warranty?
A home warranty is a contract that covers repairs and replacements of essential systems and appliances around your house. Coverage could include your HVAC system, washer, dryer, kitchen appliances and even things like ceiling fans.
How Does it Work?
Every month, you’ll pay a monthly premium to your home warranty company to maintain your coverage. In return, your home warranty company will provide you with significantly discounted repairs or replacements for covered items in your home. A warranty is different from a homeowner’s insurance policy because it covers damage that occurs as a result of regular use instead of a covered peril.
Most home warranties last for about a year but can easily be renewed after expiration. Some warranties can be purchased with a 3 to 5 year contract. These longer contracts sometimes come at a discounted price.
Note: newly built or remodeled homes typically carry a builder's warranty during the course of construction, which covers permanent fixtures in the home (like plumbing.)
Why Purchase a Home Warranty?
You can identify plenty of reasons why you might want to invest in this type of extra protection. Let’s take a look at a few situations when it would make sense to buy home warranty coverage for your property.
You’re moving into a new home: If you’re moving into a new home, you don’t know the kind of wear and tear that the appliances in the home have been through. For example, you could be living in your new house for a month and have a major issue with the refrigerator because the previous owner didn’t receive regular maintenance on it.
When you move into a new home, the last thing you want to worry about is covering the costs of expensive repairs or replacements. A warranty provides you with the peace of mind that comes with knowing that you have a layer of financial protection against previous inaction from the last homeowner.
You’re selling your house: Getting a warranty when you’re selling your house is all about giving your buyer peace of mind. This kindness on your part could also be a major incentive for a prospective buyer. After all, the buyer has no idea what condition your appliances and systems are in when they move in.
You’re budgeting and need protection: While adding on a warranty as a monthly expense may not seem like it’s beneficial to your budget, it could actually end up saving you money if something were to happen to a system or appliance within your home. A home warranty is a guaranteed, long-term protection plan that allows you to rest easy knowing that you won’t be left to cover a $5,000 repair bill if one of your major systems breaks down.
You want to be prepared for an emergency: If you live in a place where natural disasters are a higher risk, you could be vulnerable to costly issues. A natural emergency doesn’t even need to be a major disaster to cause problems for you. Lightning, which you would usually consider harmless, could cause a surge that could then damage major appliances in your home. A warranty offers coverage for these damages that aren’t covered by your homeowner’s insurance.
The bottom line? Home warranties make home repairs and replacements more affordable, which can be especially beneficial if you don’t have a fully-funded emergency fund.
What Does a Home Warranty Cover?
When you sign onto a home warranty, your service provider will specify the home systems and appliances that are included under your plan. Some companies allow you to choose between an appliance plan or a systems plan, while others offer all-inclusive policies that cover both systems and appliances. The following are a few systems and appliances that you’ll want to be sure are included under your home warranty.
- Plumbing systems
- HVAC systems and internal cooling systems
- Water heaters
- Garage door openers
- Electrical systems
- Kitchen appliances, including your refrigerator, oven and dishwasher
- Clothes washer and dryer
You can also choose to add on protections for things like window and roof leaks. While these aren’t included on many policies, you should ask your home warranty provider if it offers this coverage.
How Do You Use the Warranty?
When you sign onto a home warranty, you’ll agree to pay a monthly premium to maintain your coverage, much like insurance. This charge is similar to the premium that you pay for health insurance or homeowner’s insurance because it keeps you enrolled in your plan. Your monthly premium is due every month, even if you don’t use your coverage in a particular month.
If you need to schedule a repair or replacement for a covered system, you’ll contact your warranty service provider to file a claim. The home warranty company will review your claim and ensure that you’re covered. If you’re covered for the repair or replacement that you need, the warranty company will send you instructions on how and where to schedule your services.
In exchange, you’ll pay a per-incident service fee that’s significantly lower than the price that you’d typically pay for home appliance and system repairs. Most service fees range from $75 to $125 per covered incident.
When it comes to actually receiving your repairs, the warranty provider may only allow you to use certain companies in the area. These companies often have price agreements in place with the warranty provider, which means that they might not necessarily be the highest-quality repair provider.
In some cases, the warranty provider may consider a repair to be too expensive and will offer to replace the appliance or system instead. However, this solution may result in the provider only paying the depreciated value of the broken system or appliance, leaving you to cover the difference.
Why Does This Matter?
Just like how you would shop around for your perfect house or the perfect home insurance plan, you want to do the same when getting a warranty. It’s important to know what will be covered and what will not in order to find the best possible plan for you.
Being well-educated about what your plan does and doesn't cover will prevent you from a accepting a seller’s warranty that won’t end up being beneficial for you.
On the other hand, if you’re trying to sell your home, being aware of what a buyer’s warranty offers can keep you wasting money on something that doesn't offer extra incentive for a home buyer to submit an offer on your property.
Benzinga’s Best Home Warranty Pick
While we advise doing your own research and comparing several options, our favorite provider is Choice Home Warranty. Click below to get in touch with them and see what they offer.
Getting Home Warranty Protections for Your Property
If you’re working on a tight budget, you might assume that adding a warranty to your list of home coverages isn’t worth the expense. After all, mortgage companies don’t require you to have a warranty like they require you to have homeowner’s insurance policy — why spend more money than you have to?
It is true that a homeowner’s insurance policy won’t cover every breakdown you might face in your home. However, many repairs are covered, but a warranty can help fill the gaps. No matter if you live in an older property or you’re thinking about selling your home, it’s worth considering investing in extra coverage to protect yourself against high repair and replacement bills.
Frequently Asked Questions
Are home warranties worth the money?
A home warranty can be worth the money if you don’t have a fully fleshed out emergency fund and you want protection for aging home systems and appliances. However, you should know exactly what is and isn’t covered on your home warranty before you sign a contract, as well as any financial limitations on the policy.
Is there a waiting period for a home warranty?
Most home warranties come with a 10 to 30 day waiting period. This requirement means that you cannot use your home warranty protections for up to 30 days after you sign onto your policy. This rule prevents you from signing onto a policy for a specific breakdown you’re already seeing in your home.