Should You Get a Home Warranty?

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Is a home warranty worth the cost? Or is it better to put that money elsewhere? Here are a few things to think about. 

What is a Home Warranty?

As you probably already know, a home warranty is a way to protect yourself from major expenses. The idea is that by paying an annual fee, you are paying the home warranty company to shoulder the risk of paying for a major repair. 

For example, let’s say a toilet breaks and you need a repair. If you pay for it out of pocket, it might cost you $200. If you have a home warranty in place, they may charge a small fee to come out, say $50, but then fix it for free. So in that case you saved $150. 

In that case, it may not seem worth the annual cost of the warranty. But what if you also had a dishwasher break, and it turns out you need a new one? That’s not cheap, about $500 for a decent dishwasher and another $200 to install it. In that case, you’re coming out ahead because the $50 fee you paid plus the annual fee will be less than the $700 for a new dishwasher. 

That’s why a lot of people swear by home warranties. They shoulder the big costs when something breaks… and it always seems like something is breaking, right? 

Depending on the warranty, your plan can cover a wide variety of things. Typical coverage includes

  • Appliances
  • Plumbing
  • Roof
  • Air conditioner
  • Furnace
  • Heat pump
  • Sump pump

What are the Pros of a Home Warranty?

The first advantage is that a home warranty kind of makes homeownership feel like renting. You don’t need to worry as much about major repairs, because someone else will pay for (most of) it. That means you get the advantages of owning a home but also have an advantage of renting. 

A second benefit is you can budget money a bit better. You don’t need to put as much money away for a rainy day. Instead, you can allocate it to other things like saving for a vacation, retirement, or your child’s college. 

Third, it gives you some mental peace-of-mind. You don’t need to lie in bed at night worrying if that 20-year-old furnace is about to break. You can sleep peacefully knowing that if something happens, it will be taken care of. 

What are the Cons of a Home Warranty?

The first is to understand that home warranties have limits. Even if it covers the type of expense, it may not cover the whole thing. For example, a new heat pump system may cost $6,000. If the limit on your warranty is $2,000, it means you have to pony up the remaining $4,000. 

Another disadvantage is you don’t have much of a choice when it comes to the contractor or appliance installed. The warranty company may hire a contractor that isn’t very good, just because they’re inexpensive. Likewise, the new equipment they install may not be the best since they’re trying to save money. 

Finally, you need to go through the proper channels. If you have an emergency, you can’t just call your favorite contractor. You need to go through the home warranty system, which slows everything down. 

Should You Get a Home Warranty?

There is no clear-cut answer on this one. Our best recommendation is to compare a few companies and understand the terms before you invest in one. 

Any questions about a home warranty, or any other aspect of homeownership? Give us a call at (562) 924-7884. We’ll talk to you soon!

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