A home warranty covers the hiccups and breakdowns of a house’s appliances and systems. Depending on the policy, it may cover only systems (e.g., heating and air conditioning), only appliances (e.g., washer and dryer), both categories, or a custom list that you select item by item. A warranty could save you thousands, providing that what breaks (and how it breaks) is covered.
If you’re wondering “Do I need a home warranty?”—the answer is, technically, no. You don’t have to acquire a home warranty to purchase a house like you need a homeowners insurance policy. A home warranty is an additional service contract that works in conjunction with your homeowners insurance. The home warranty provider can fix or replace the appliances or systems covered if they break down.
How does a home warranty work? You pay a home warranty company a premium every year, and when one of your covered items breaks, you contact your home warranty provider. The company sends out a technician to assess the damage, but you’ll have to pay a service charge that costs an average of $50 to $100 per visit. Although it can be more.
What Is Covered by a Home Warranty?
The exact items that your home warranty covers depend on which one you choose. Generally, your home warranty covers the essential systems of your home—like plumbing, electric, heating, and cooling—as well as your major appliances. You can choose to add on coverage for things like a pool, spa tub, or septic system.
However, the warranty provider will repair your item until it calculates that replacing it would be the cheaper option. Also, when the company replaces your appliance, it may not let you choose which one you want. Keep this in mind when you rely on your home warranty to replace your appliances.
What Is Not Covered by a Home Warranty?
Most of the complaints about home warranties to the Better Business Bureau is consumers not receiving the benefits they expected. Home warranties won’t cover things like flooring or walls. So if your washing machine breaks and floods your entire basement, requiring you to remove all the laminate, the warranty may fix your washing machine, but to replace your flooring and anything else damaged by the flooding, you’ll need to turn to your homeowners insurance.
Your warranty may not cover every appliance, either. Take time to look at which exact items will be covered before you purchase a home warranty.
When It Makes Sense to Purchase a Home Warranty?
If your home or your major appliances are older and you’re worried they’ll stop working, a home warranty might make sense. A warranty keeps specific items in a working state, no matter their age. Your homeowners insurance will cover more foundational features of your home, as well as any damage caused by natural disasters or fires. However, if you bought a new home, it’s probably not worth signing up for a home warranty since most likely you’re still covered by the manufacturers.
Below we break down a few instances where getting a home warranty makes sense.
- You aren’t handy. If you don’t have the time or the skillset to fix things around the house on your own, a home warranty might ease some stress that breakages could cause.
- You’re on a tight budget. Buying a house is expensive. If you wouldn’t have wiggle room to throw down enough cash to cover a major appliance going on the fritz, it might make more sense to pay the warranty premium so that situation is covered.
- You own older appliances. If your major appliances are nearing the end of their life span, a warranty can help. This fact is especially true for the more expensive items like an air conditioner or furnace that can cost several thousand dollars to replace.
- Your house is more than 10 years old. If your home was built more than 10 years ago, a warranty can help cover any appliances that are bound to break down soon due to regular wear and tear. Otherwise, if everything is brand new, a warranty wouldn’t be a great way to spend your money.
How to Shop for a Home Warranty?
If you decide to get a home warranty, the most important thing you can do when shopping around is to talk to several different reputable providers. Getting quotes from multiple places can seem like a lot of work, but it helps narrow down how much you need to spend on a warranty and what’s fair.
Look for a warranty that allows you to customize exactly what you need. If all your appliances are new, but your heating and cooling systems are on their way out, find a warranty that allows you to cover only those systems in your home. This type should save you some money. Check out our breakdown of the best home warranties on the market to start your search process.
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About the Authors
Tiffany Verbeck is a personal finance writer for Reviews.com. Over the last year, she's covered credit cards, home security, and more at The Financial Diet, The Simple Dollar, and Interest.com.