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Whether you’re a first-time homebuyer or have owned your home for years, you may wonder if you need a home warranty. A home warranty, which functions as a service contract for your appliances and systems, can help you pay for repairs or replacements.
However, there is some debate about whether home warranties are worth the cost. Do they really save you money? Are they too limiting in the coverage and technicians they provide? By learning more about home warranties, you can decide whether they make sense for your situation.
Dive in: Home warranties: Costs, coverage, and how they work
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Every homeowner has different needs. To decide whether home warranties are worth it, you’ll need to consider the specifics of your home and your finances. Here are some scenarios where getting a home warranty could be worth it.
If you buy or own a home with older appliances and systems that you suspect will need repairs or replacing, a home warranty could save you money. Your home inspector may be able to estimate the lifespan of your appliances, and you can check how long most systems and products last with a little online research. However, most home warranties don’t cover preexisting problems or systems that have been poorly maintained, so be sure to read the contract to understand the coverage offered.
Learn more: Your home inspection checklist
Home sellers often purchase home warranties for their own protection while their home is on the market. After the sale, the warranty is transferred to the buyers. Sometimes, a real estate agent will pay for the home warranty to incentivize the buyers.
Read more: How seller concessions work
If you don’t have much money saved to fix or replace an appliance, a home warranty might come in handy to keep your house running while you save up. Just be sure you can comfortably afford the monthly premium that comes with the warranty.
When you’d rather hand over control
Your home warranty company will choose the service people who fix your systems and appliances, but sometimes they take longer to arrive than if you hired your own. If this doesn’t bother you, a home warranty could be a good fit — but if you want more control over the situation, consider an alternative.
The home warranty can help you pay for unexpected repair costs and may entice some buyers. This can be especially useful in a buyer’s market when homebuyers have more power than sellers.
As a landlord, repair expenses can pile up quickly. It may be worth evaluating the price of a home warranty so you don’t have to find a technician or fix these problems yourself.
Read more: How to buy a second home
When you purchase a newly built home, you’ll have warranties from your builder and the manufacturers of the appliances and systems installed in your home. So, an additional home warranty is typically not necessary.
On the other hand, even if you own a particularly old house, a home warranty may not be beneficial. Appliance parts and home systems might be obsolete or no longer available. Warranties also typically don’t cover preexisting problems, which can be common in older homes.
Consumer advice sites such as Consumer Reports and Consumers’ Checkbook suggest that home warranties are rarely worth the money since they have so many limitations and fees. The contractors they hire work for third-party companies, and you aren’t the contractors’ client — the home warranty company is. This means they consider the company’s interests before yours, and there are many limitations on your repairs or replacements.
For example, a home warranty company could decide to replace an appliance but only cover the depreciated value rather than the cost of a new appliance. This would leave you on the hook to pay the remaining costs.
Dig deeper: Buying a new construction home: Pros, cons, and how to finance it
If you’re still deciding if a home warranty is worth it, there are some key considerations to evaluate before opting to pay for one.
1. Other protection for your appliances and systems
There may be a manufacturer’s warranty in place, or your credit card company may have automatic buyer protection in some cases. If you’re buying a house, the previous owner could have bought an extended warranty.
2. The cost of the home warranty and fees
When you purchase a home warranty, you pay premiums (usually monthly or annually) and a service call fee each time a technician visits your house. Home warranty rates vary widely by location, company, and other factors, so you must determine whether the annual cost and service fees per visit are worth it — and whether you can afford that added monthly/yearly cost in your budget.
If you need to replace your washing machine, dryer, dishwasher, or other major appliances soon, a home warranty could be worth the cost. But if they’re brand new — or so old that a warranty company would consider them to have preexisting defects and not cover the costs — a plan might not be for you.
Home warranty plans typically have multiple levels of coverage and vary by company, so you need to read the details to understand how much will be paid for repairs or replacements. You might have to pay for a premium plan or individual add-ons to get the coverage you need.
Most home warranty plans set a maximum amount they will pay with the expectation that you will pay the rest out of pocket. If an appliance or system can’t be repaired and the company recommends a replacement, the warranty may not cover the full replacement cost or offer the model you prefer. Also, home warranties don’t usually cover structural elements and windows — and not every appliance and system is covered.
Ensure the feature you’re concerned about will be included in the home warranty. You may want to pay to upgrade, search for a different company, or even realize that home warranties won’t cover that specific appliance in general.
If you decide a home warranty isn’t for you, there are other ways to pay for repairs besides putting them on a high-interest credit card or taking out a personal loan. Here are a few to consider:
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Create a dedicated repair fund. Put the money you might have spent on a home warranty into a separate account designated for home repairs and appliance replacements.
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Check your credit card agreements. You may have some extended warranty coverage automatically through a credit card.
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Check your appliance receipts. Depending on how long ago you — or the previous homeowner — bought the refrigerator or oven, you may have a warranty you don’t know about.
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Add a service contract to a few major systems. For costly appliances, such as your water heater or HVAC system, you may want to opt for a contract with annual equipment service rather than a home warranty.
If you’re buying or selling a home, talk to your real estate agent for advice about whether they think a warranty is a good idea based on the house and the current real estate market. If you’re already a homeowner and on the fence, talk to people you know and trust to gain their perspective.
Learn more: What do real estate agents do?
Home warranty costs vary by location and coverage level. Home services company Angi estimates the average annual cost is $1,049. This number doesn’t count service fees per visit, which typically range from $50 to $125.
Home warranty plans can be costly, and the policies often allow the warranty company to deny payment for repairs or replacements for various reasons. There are limits on what can be covered and for how much. In addition, the work is performed by third-party contractors who may not provide service up to your expectations.
A major perk of home warranties is that they protect against issues that homeowners insurance policies don’t cover. For example, a home warranty covers normal wear and tear on appliances. On the other hand, homeowners insurance protects the owner in cases of natural disaster or theft.
Yes. All real estate transactions are negotiable, so you can ask the sellers or your real estate agent to buy a home warranty plan on your behalf.
This article was edited by Laura Grace Tarpley.