the pros and cons of buying a home warranty photo by

A home warranty service contract is designed to help homeowners manage the cost of unexpected home repairs. Home warranties go beyond what your homeowners insurance covers, taking care of properly maintained appliances and systems that fail due to normal wear and tear.

How Home Warranties Work

Most home warranties cost between $350 to $500 per year and require an affordable flat service call fee for each repair, while home repair expenses without a warranty may costs hundreds or even thousands for every repair needed. If a covered appliance or system breaks down, you’ll simply need to call or email your warranty company for a claim, and they’ll send out a service technician to repair or replace your equipment.

Home warranties are popular among real estate transactions, as new homeowners want peace of mind that important repairs will be covered in their new investment, and sellers want to assure potential buyers that their home will be taken care of.

If you’re considering a home warranty service contract, you may not be sure if it’s right for you. Consider these pros and cons of buying a home warranty to decide if a service contract is a good idea for your home.

The Pros of Buying a Home Warranty

There’s a lot to love about home warranty service contracts: you can save money and rest easy knowing that major repairs in your home will be taken care of, and panic-inducing repairs become an easy fix. Find out why so many homeowners love and often renew home warranty services.

    • Peace of mind: The single biggest benefit that a home warranty offers is the ability to relax and avoid worrying about repairs in your home. Leaky toilets or a broken air conditioner aren’t a crisis with home warranty: a fix is just a phone call away. Costly repairs that might have brought financial hardship aren’t an issue: they’re likely covered under your home warranty.
    • It’s an easy fix: With a home warranty, you only need to remember one number, or even simply send an email for repair. You don’t have to spend time searching for and researching reputable repair companies, because your home warranty has already chosen the best companies to take care of the job. You also don’t have to wait until business hours to start your repair: Choice Home Warranty claims can be submitted online or over the phone 24/7/365. All you have to do is call the warranty company and wait for the repair truck to arrive.
    • A warranty is relatively inexpensive and can more than pay for itself: With a home warranty, you’re likely to see big savings on the most common repairs. Most home warranties cost between $350 to $500, while experts recommend that homeowners plan to spend between 1 to 4% on home maintenance and repairs each year. For a $200,000, that’s a minimum of $2,000 annually, far more than the cost of a home warranty.
    • You can avoid going into debt for major home repair expenses: Serious issues like plumbing system breakdowns or broken air conditioners can cost thousands of dollars to repair or replace. For homeowners without an emergency savings account (or an inadequate savings budget), the cost of repair or replacement can be devastating, and will typically require a payment plan. This establishes or adds to consumer debt that can put a drain on your monthly budget and strain your credit rating. With a home warranty, you don’t have to worry about going into debt if your electrical system goes out.
    • Your warranty may be free: If you’re buying a home, your warranty may be free for the first year. It has become increasingly common for sellers to include a home warranty in home sales to encourage confidence and attract buyers.
    • Service calls are offered at an affordable flat rate: While some repair companies may charge up to $150 or more just for a service call and vary by company, Choice Home Warranty’s service calls are a consistent $60. This is an affordable rate for most homeowners, and is always the same no matter which company performs the repair, and no matter the cost of the repair or replacement of your covered item.
    • You can choose the protection that fits your needs: Choice Home Warranty offers a basic plan and a total plan. The basic plan covers major systems including heating, electrical, and plumbing, as well as appliances including your dishwasher, oven, and fans. With the total plan, you’re able to add air conditioning, your refrigerator, washer and dryer, and more. There is also optional coverage for items including the septic system, pool, and limited roof leaks. Customizing your coverage allows you to save on items in your home that you’re not worried about, or increase your coverage so that you’re completely covered for home repairs.
    • Home warranty is a great incentive for buyers: If you’re planning to sell your home, a home warranty can instill confidence in buyers. You can highlight that your home has carried a home warranty, so repairs have been completed on time and in a satisfactory manner, and give new homeowners peace of mind that they’ll be covered if anything goes wrong. You’ll also likely see a bump in your sales price: the Service Contract Industry Council reports that sales prices are 3% higher on average for homes with warranties.

The Cons of Buying a Home Warranty

While there are many benefits of home warranty coverage, the fact is that it’s not as simple as buying your plan and forgetting about taking care of anything in your home for a year. You’ll need to carefully maintain your home, and for certain homeowners, the expense of a home warranty contract may outweigh the actual cost of repairs.

    • You may not need it: If your home is still relatively new (less than 5 years old), or simply very well cared for, you may find that you have no claims to submit. Avoiding home repairs for an entire year is a good problem to have, but it may make you feel that the money you’ve invested in your home warranty didn’t pay off. Still, a few hundred dollars is a small price to pay for peace of mind on the chance that you need a serious repair.
    • Home warranty won’t fix what’s already broken: Pre-existing conditions, like poorly maintained systems or broken fixtures, are not covered under your home warranty. So if you were hoping to get all of your new home’s problems fixed by your home warranty company, think again. You’ll likely be required to share your home inspection to show that items were in good working order when you purchased the home warranty.
    • You can’t choose your service provider: Repair companies are chosen by the home warranty, and you do not have the option to pick and choose among different providers. You will simply be sent the company that the service provider trusts to do the job. That means your favorite repairman may be out, but on the plus side, you’ll be sent contractors who have been carefully reviewed and vetted by the home warranty company.
    • Important systems may cost extra: Your air conditioning, refrigerator, or septic system represent a significant repair expense if anything goes wrong, but they aren’t included in basic home warranty agreements. You’ll have to pay extra if you want these important items covered.
    • Repairs are more likely than replacement: Your home warranty will always try to repair before replacing a unit or system. For homeowners who are otherwise happy with the equipment in their home, this is not a problem. But if you’d like to invest in smart upgrades, a home warranty may not help. Upgrading to a new and more efficient refrigerator or air conditioning system is likely to be an expense your home warranty will not cover.
    • You’re required to carefully maintain all systems and appliances: Repairs are covered by your home warranty, but you’re on your own with maintenance. And that’s not all: if you don’t keep up with proper maintenance, your claims may be denied, as the warranty company can’t be liable for equipment that is abused or otherwise not taken care of. That means you’ll need to schedule regular service for all systems and appliances, and keep careful documentation of when and how they were serviced.
    • Your warranty may be more expensive than DIY fixes: If you’re a handyman (or handywoman) who enjoys taking on DIY projects and fixes at home, you already know how much you can save on labor just by doing it yourself. While not every repair covered by home warranty is within the skill level of a DIY fix, some homeowners may find that instead of using a home warranty, it’s simply cheaper to tackle repairs on their own. Still, even DIYers can enjoy the benefit of a home warranty that allows you to avoid costly and complicated repairs including major systems or appliances.
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