Are Home Warranties Worth It?

There is a lot to consider when purchasing a new home. A home warranty is one more decision to make—and it can be difficult to determine whether a home warranty will help protect your investment and ultimately save you money.

home warranty is a protection plan that covers the repair of large appliances and other major items in your home. It can be helpful to think of a home warranty as a service contract, rather than an insurance policy.

Plans cover repairs on a wide range of items, including:

• Air conditioners
• Washer and dryer
• Water heater
• Doorbell
• Kitchen appliances including refrigerator, oven and range, dishwasher, garbage disposal
• Roof leaks
• Electrical systems
• Plumbing systems
• Heating and duct work

Every home warranty is different. Your coverage will depend on the provider and the particular plan you select. If you’re looking for more from a home warranty, you may be able to purchase additional coverage that extends to items such as a pool or spa, the septic pump, or well pump.

When using your home warranty plan to pay for a repair, you may be required to use a contractor or professional who is approved by the home warranty provider.

Read the terms of your plan carefully to understand everything it covers, what the limits and exclusions are, and what you might be responsible for as the homeowner. A Consumer Reports analysis of available home warranties found that coverage varied widely. In some cases, for example, warranties covered the refrigerator but not the ice maker that came with it. Other policies covered the hot water heater but not the water tank itself.

There are many other reasons that repairs could not be covered under a home warranty:

• An appliance breaks under certain circumstances, such as a power surge.
• Your appliances could be too heavily worn or deemed to have too much “wear and tear.”
• Some repairs may instead be covered by homeowner’s or hazard insurance, or by the manufacturer’s warranties on the appliances.

Appliance repairs can be expensive. If your home warranty covers one or more necessary, major repairs, a home warranty could save you money. And because these plans tend to cover a range of problems that homeowner’s insurance does not, a warranty can fill the “gaps” in coverage and provide you with additional peace of mind.

It’s difficult to know if a home warranty will actually save you money in the long run, but purchasing one may be a good choice if

• You’re a first-time homebuyer
• You’re inexperienced with repairs
• You are purchasing an older home
• Your new home has appliances that are not covered under manufacturer’s warranties
• You are concerned about being able to pay for repairs if and when they come up.

Home warranties are typically purchased during the sale of a property. However, you can purchase a home warranty at any time—not just when you’re buying a new home.

In some cases, a home warranty will be paid for by the seller. If you’re interested in purchasing one and the seller has not included it, discuss it with your realtor: A warranty could become a part of your negotiation.