If you're looking to buy a home (especially if it's your first), there are a lot of costs to consider, including whether to get a home warranty. A home warranty protects major appliances and systems in a house, such as AC, electrical, plumbing, dishwashers, and any refrigerators. On average, home warranties cost $300 to $600 every year for a comprehensive plan that covers appliances and systems-about $25 to $50 a month, according to numbers by Consumer Affairs.
If one of the appliances covered under your warranty breaks down and a technician needs to take a look, plans charge a service call fee to file a claim, which can range from an average of $65 to $125 or more. Home warranties also have different tiers, with premium tiers covering add-ons like a pool and spa, but those plans cost more-between $720 and $1,800.
A home warranty is a negotiable item in the contract when you're looking to buy a home, so you could potentially ask for it to be covered by the seller. However, it's a seller's market right now, and most sellers are leaving it to you to buy a home warranty if you want it, says Khari Washington, broker and manager at 1st United Realty & Mortgage.
So are home warranties really worth it? With all the costs of owning a home, the price of a home warranty that covers most or all of your appliances and systems can add up. Here are some pros and cons to consider so you can decide if a home warranty is worth it for you.
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Pros of Home Warranties
A home warranty can give you peace of mind.
A home warranty can give you the security of knowing that your appliances are protected and someone will be sent to repair them if needed. This way, you don't have to worry about the repair costs.
"It helps you in better financial planning, as you don't need to worry about saving for home repairs ... that may be inevitable at any time," says Johell Aponte, real estate expert and owner of Move On House Buyers. When you're renting and an appliance needs repair, you just call the owner or building maintenance and they will likely fix it for you. But when you own a home, it's on you. A home warranty can give you the kind of security you might miss from your renting days-especially if your house is older and the appliances are no longer under factory warranty.
A home warranty can help you save money in the long run.
The cost benefits of home warranties are definitely something to consider. Repairs in your home can easily add up, especially as a new homeowner still getting to know the place.
"It's best to consider the age of your appliances and systems," says Tyler Forte, cofounder and CEO of Felix Homes, a Nashville-based platform that helps sell homes for a lower commission. "If they are near or past their life expectancy, a home warranty can be a good idea." For example, if something goes wrong with your dryer, it costs an average of $1,075 to replace but about $250 to repair it with a home warranty.
"Like home insurance, you hope you'll never have to make a claim," says Melanie Musson, a finance expert with US Insurance Agents. "Most people won't need one, but if you do have a costly issue with your house, a warranty can ease financial stress." While you will have to pay service fees for visits, you won't have to pay more than the deductible.
Cons of Home Warranties
Home warranties only cover everyday-use repairs.
Yes, home warranties can give you security, but the coverage can be complicated-and limited. Home warranties don't cover appliances and systems that aren't properly maintained.
"You're required to carefully maintain all appliances and systems," says Forte. "If you don't keep up with proper maintenance, your claims may be denied." Make sure you read the terms of each plan very carefully and have a full understanding of what it covers before deciding on one. Some warranties only cover certain brands, so check to see if your appliances are on their list.
"The warranty company is an insurance company and will look to see if non-covered items caused a covered item to fail," says Washington. They might also check to see if the appliance was already failing before you got the warranty.
Related: How Much Does A Home Warranty Cost?
Home warranties can be redundant.
If the appliances in your house are new and already have warranties, buying a separate home warranty would be a waste of money. Newly built homes generally have one-year warranties for appliances and systems, too. If your home already has warranties in place, you probably don't need an additional home warranty.
"One of the best ways to select a home warranty is to look for the one that compliments your homeowner's insurance," says Aponte. "This means that your home warranty and insurance policy shouldn't be overlapping and shouldn't cover any similar component."
Out-of-pocket costs can still be high.
Having a home warranty doesn't always guarantee savings. For starters, most home warranties only cover repairs, not replacements-so if the item is beyond repair, you're probably going to have to replace it yourself. Plus, some plans have high deductibles, so if the cost of repair is close to that amount, you might not save much money. Musson suggests looking at the maximum amount a plan will cover per item. If the plan only covers a fraction of the cost you would expect to pay for repairs, then it might not be a good investment.
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Home warranties are worth it if there is no existing coverage for your appliances and home systems and if you find a plan that includes the items that you want covered, so you end up saving your money rather than wasting it.
"They can be good when first buying a home because you don't know what you're getting," says Washington. You could always try it for the first year or two, while you get to know the place and see how the appliances work and cancel later.
Forte suggests asking your real estate agent if they have any home warranty companies to recommend. The important thing is to do your research and choose a plan with the right kind of coverage for your needs-or you could end up paying a lot for repairs out-of-pocket and paying for a warranty you don't use.