Like many homeowners, you've probably wondered if you should get a home warranty. You want protection for your home systems, but is it worth the cost? There are mixed opinions about whether purchasing a home warranty is the right choice, and it can be a difficult decision. With the information below, you can decide for yourself if a home warranty is right for you.
A home warranty is a service agreement meant to cover the repair or replacement of systems and appliances in your home. If a covered system or appliance needs fixing or replacing, you make a claim to your home warranty company, and a service provider will come to your home to diagnose the problem and determine how to move forward with fixing or replacing the item.
A home warranty is different than homeowners insurance. Although they both offer protection for the home, it is a different type of coverage. Homeowners insurance protects you if your house sustains damage from a fire, lightning strike, windstorm, theft, etc.
A home warranty covers major systems and appliances in your home, such as cooling and heating systems, washers and dryers, electrical systems, plumbing systems, kitchen appliances, etc. Many home warranty companies allow you to customize your home warranty coverage by choosing which systems and appliances you would like coverage for.
The average home warranty costs between $350 - $600 per year, depending on the type of coverage you choose. Basic coverage is at the lower end of the range, while more extensive coverage is at the higher end of the range. If you can afford the upfront cost of the home warranty as well as the possible additional service fees, a home warranty is most likely worth it for you. Even though you have to pay a yearly cost for a home warranty as well as additional service fees, this is still likely to be significantly cheaper than fixing your systems and appliances out of pocket.
The average home warranty service fee ranges from $50 - $100.
Usually, home warranties do not require a home inspection. Many home warranty companies advertise no home inspection to make the process simpler for the customer. However, some home warranty contracts state that preexisting conditions for your systems and appliances aren’t covered. Without showing your home warranty company the condition of your systems and appliances at the time of the purchase agreement, your claims could go unapproved. Consider doing some kind of inspection with your home warranty company to ensure you both know the condition of your systems and appliances at the time of purchase.
The answer depends on numerous factors:
Realtor Patricia Vosburgh advises all her clients to include a home warranty with the closing deal. She explains doing this helps with the sell and also ensures the homeowner has coverage in case anything breaks after purchase.
Vosburgh mentions that costly repairs such as an air conditioning system can be upwards of $3,000, so the cost of a home warranty is worth the initial cost. If you’re in the process of buying a home, see if the seller can throw in a home warranty as part of the closing deal.
As a home inspector, Michael Marlow has significant experience with home warranties and has had a home warranty for every house he has owned since 2000. Unfortunately, Marlow found out the hard way that not all home warranty companies deserve your business:
We purchased a new construction home in 2003, and about 18 months later (right after the builder’s warranty expired), we started having problems with the HVAC just quitting… Over the course of the next four years, we had the home warranty company send out a tech for the same problem, paying a service call each time, and they repaired it. Mind you it was a different company each time.
When the system finally died in 2008, we called them again, and their service technician reported that the system had been so modified by previous technicians that the system could no longer be repaired. The solution the home warranty company provided me was to give me cash in lieu of repairs, so they gave me $700. It ended up costing me $7,000 to have the system replaced.
Marlow also reports hearing from past clients that some home warranty companies have claimed preexisting conditions on claims when his inspection report clearly notes that the system was working at the time of the inspection.
Fortunately, Marlow switched home warranty services and now has a more trustworthy home warranty company. If his home inspection says a system or appliance was working at the time of inspection, the home warranty company will not deem it a preexisting condition. He also doesn’t have to worry about the home warranty company refusing to service a system because of previous attempts.
If you find the right home warranty company, you don’t have to worry about dishonest business practices and a company ripping you off.
To avoid any miscommunication between you and your home warranty company, Marlow advises “Read the fine print. Don’t just go by the flyer or your realtor’s recommendation; Get a copy of the full policy and read what is covered and what is not covered.”
Morgan St. James, an author and home warranty customer, notes that a home warranty can definitely be worth it, but there are some things to look out for — and reading the fine print is one of them. "In my opinion, a home warranty is worth it if you have researched what the particular company covers. I’ve maintained one on my home since it was new (18 years). The main advantage is that it is a hedge against unexpected expenses, but only if your particular warranty covers the item that has gone kaput.
"My first company replaced a water heater (expensive repair), repaired my air conditioning compressors and thermostats, replaced a valve in the tub of one of my bathrooms, fixed my built-in microwave, worked on a refrigerator repair, and miscellaneous other items. Well worth it, right? However, after 12 years, they changed their exclusions and, of course, the previously covered item I called about was now excluded as well as several other items." To avoid this, "If your policy automatically renews, check any changes in exclusions for the coming year."
Real estate expert, Benjamin Ross, notes a similar problem to Marlow. "Some home warranty companies will go to great lengths to repair before they replace a part or unit. They will repair even if the best option is to replace them. This can be very frustrating for the homeowner. Scheduling multiple appointments for the same problem with no end in sight can be very frustrating and inconvenient."
Like any industry, not all home warranty companies are trustworthy. Reading online reviews can help you avoid situations like Marlow’s and Ross's. The common theme in customer reviews seems to be home warranties are worth it if you find a trustworthy company that will not take advantage of you. Make sure the company you choose has trustworthy sales tactics and that they don't try to cheat you out of replacements based on contractural issues or a claim of pre-existing conditions.
Even having home warranty issues in the past, Ross still says that home warranties are worth it. "I have used them for years and saved thousands of dollars. Just be sure you understand the ins and outs of the agreement."
James has similar thoughts to Ross. "Read what their customers have to say about [the home warranty company]. There will always be negatives on any company, but what is the percentage of good to bad and what was the experience of the customers with a low rating?
David Moreno and Benjamin Joseph, founders of Liberty Home Guard, explain that an important part of vetting home warranty companies is to ask them if they're licensed. "It is of the utmost importance to homeowners that entities are licensed in the states in which they operate. Even if a consumer lives in an unregulated state (like Maryland), he/she should still ask the company if they service regulated states (like California, Arizona, and/or Texas). If the home warranty company says yes, then the consumer should do his/her due diligence to verify this information by asking for the company’s license number, or just by searching the particular state’s database. This is a great way to tell whether the company is being forthright with you or not."
Moreno and Joseph also note that the claim process can make or break a positive home warranty experience. "Consumers should call a company’s claims line to see how the people on the claims team (that is, the department actually servicing customers) interact with them.
Are the claims personnel willing to talk and answer questions?
Do they answer questions quickly and in a professional manner?
Are they effective communicators and the type of people you would want behind you?
"Of course, it's always important to read the contents of the policy, but frankly and unfortunately, there are too many providers out there who promise the world in a policy and then don't deliver. As an example, if an AC unit has a refrigerant leak, that's virtually always irreparable. However, many home warranty companies that promise the world in their policy opt for the very short-term and damaging repair job of pumping the system full of more refrigerant, which is bad for the system, bad for your home, and bad for the environment.
"By opting for this quick-fix, these companies are potentially exposing your household to harmful chemicals. At Liberty Home Guard, for these types of breakdowns, it is standard procedure to replace the unit, and we don't shy away from such replacements. In other words, we don't apply short-term fixes to long-term problems, and we don't promise the world with no intention of delivering."
Real estate agent and homeowner Ian Bush advises “when deciding if you are going to purchase a home warranty, I think you have to consider the age of the appliances in your home, their typical lifespan, and whether or not you can afford to fix or replace them when they fail.”
Bush has lived in his home for 18 years, so many of his appliances are at the end of their life. He purchased a home warranty to reduce the cost of the repairs and replacements when they fail.
Bush notes that because most home warranty policies include three tries to repair followed by a replacement, it is a relatively inexpensive way to protect your systems and appliances. Having older appliances makes a home warranty worth the investment, and Bush ended up saving significant money and time in the long run.
Ben Mizes, a licensed realtor and CEO of Clever, agrees that you need to take into account the age of your appliances. "Home warranties are a great option for homeowners who might not be able to afford large and unpredictable repairs or homeowners who own old homes that will need many repairs. A typical home warranty costs between $300-$700 annually and will cover major appliances and systems, although warranties usually won't cover pre-existing conditions or problems that are caused by a lack of maintenance." We discuss his last point of lack of maintenance in the next section.
However, if you have a newer home and your systems and appliances are in good shape, you may consider holding off on a home warranty. Melanie Hartmann, owner and CEO of Creo Home Solutions, has advice for those in this situation: "if you have time left before the bulk of your systems will need to be replaced, it may be more cost effective to set the money you'd pay for a home warranty aside in a high return savings account. This way, you have access to the funds when they are needed and can choose the company you want to fix or replace the system. Additionally, depending on the account that is set up, you'll also earn interest on the money that is set aside.
Hartmann does note that "this will only work for those who can set the account up and only draw money from it when needed." If you can't guarantee that money for home repairs, "it may be best to purchase a home warranty from a reputable company so that there is no temptation to spend those funds on something else."
To help you determine the age of your systems and appliances, check out the infographic below that shows the average lifespan of systems and appliances and their average replacement costs.
Andrew Helling, a Nebraska-licensed real estate agent and the owner of REthority.com, advises everyone who has a home warranty to complete proper maintence on covered systems and appliances or else home warranty companies can deny coverage. Helling explains why: "Home warranty companies exclude appliance or system failures due to improper installation or maintenance. For example, furnace filters should be changed at least every 6 months to avoid HVAC damage. If the filters are not changed and the system fails, the home warranty company will not cover the damage because the system was not properly maintained."
If you opt for a home warranty and pay all of this money upfront, you don't want to be denied coverage just because you weren't properly installing or maintaining your systems or appliances. We suggest keeping a list of all necessary maintenece work and completing it regularly as well as ensuring the installation of all systems in your home is done correctly and efficiently.
When asked if her home warranty is worth it, homeowner Carol Gee didn’t hesitate to say “yes.” Gee first had a home warranty as part of a closing gift from the seller of her current home. At first, Gee and her husband did not use the home warranty, and they wondered if they really needed the $350 yearly expense.
Two weeks before the end of her home warranty agreement, Gee walked into her laundry room only to be greeted by several feet of water — her water heater had died. Gee’s husband called the home warranty company to explain what happened and by the following day the technician had installed a new water heater and hauled the broken one away.
Since then, the Gees have used their home warranty for their air conditioning system, furnace, oven, and garbage disposal.
Now that they know how helpful a home warranty can be, the Gees don’t want to be without it, especially now that they are retired and don’t want to worry about unexpected repair costs. Gee happily recommends home warranties to everyone she knows.
Gee sums up her home warranty experience by explaining that home warranties are like life insurance and car insurance: you hope you never have to use them but you are so glad you have them when something goes wrong. A home warranty gives you peace of mind that you won’t be left scrambling when a major system or appliance breaks.
We also spoke with Becky Beach, designer and blogger for MomBeach.com, who told us that she's had a home warranty for years and it not only gives her peace of mind every year, but it also saves her a great deal of money.
Like many homeowners, Debi Goldben is handy when it comes to minor home repairs. However, there are costly and difficult repairs that she does not want to do herself. With major systems and appliances that are difficult to fix, Goldben feels a home warranty is “worth its weight in gold.” Since having a home warranty, Goldben has had numerous major systems and appliances fixed and replaced, saving her at least $3,000.
A home warranty is a great resource because it can take care of all the major fixes you can’t or don’t want to do yourself. Many home warranty companies even offer customizable coverage that allows you to choose the systems you want covered, which ensures you are only paying for the coverage you want.
Often times, you can receive a home warranty as a closing gift from the sellers of the home you're buying. Then, you don't have to pay the annual fee and you only have to worry about service fee costs. Connie Heintz, with the company DIYoffer, did just that and she's grateful that she did. "When I purchased my second home, I asked the seller to include a one-year warranty in the price of the house. I figured that by taking responsibility for the cost of the warranty, they’d be more incentivized to make repairs before I moved in. Luckily they were happy to oblige, as there was a major plumbing failure a few months after I bought the property. If I hadn’t done that, I would’ve been stuck with a hefty bill."
Heintz makes a great point that if sellers include a home warranty as part of the transaction, they'll be more incentivized to make system and appliance repairs before you move in.
And from the seller's point of view, incentiving a home warranty with the sell of your property will likely encourage someone to buy. Anything that makes your offer stand out above the rest is worth it.
Many consumers opt for basic home warranty packages thinking it will cover most home repairs and are disappointed when they come across a more complex system or appliance issue and their home warranty doesn't cover it. Home warranty packages are not one size fits all, so you need to make sure the plan you're getting covers everything you need it to.
To help with this, Melissa Zavala, a Broker of Broadpoint Properties, suggests the following: "It is important to take time to check what is covered and add additional coverages before purchasing. As an example, plumbing from the main to the home is often not covered unless you pay for the extra option. So, spending a few minutes looking that over and considering the benefits of the add-ons can be a good idea."
Zavala notes that this is when home warranties can still be a valuable purchase. "When used properly, it can save you big bucks on roof issues, hot water heaters, dishwasher and oven issues among others. Most newer model ovens have a computer microchip that provides the digital display and wears over time and is very costly to fix. So having a home warranty just to address that single issue can save a person hundreds of dollars, maybe even thousands depending upon the type of oven."
If you do your research and get the type of coverage your home needs, a home warranty definitely has its perks.