Is a home warranty worth it?
Before you buy, know what's covered and what's not to avoid nasty surprises.
This post comes from Jim Wang at partner blog Bargaineering.
While walking our dog, Tobey, on a recent morning, I walked by a home for sale that advertised a free one-year home warranty. It turns out that a lot of homes are offering this as a way to differentiate themselves from other homes. It's a way for a house to stand out on the street because you get to put a placard up that screams "Free One-Year Home Warranty."
Back when we bought our home, throwing in a home warranty was like a cherry on top. Buyers battled for homes but sellers probably thought throwing in a home warranty could juice up demand even more. What's not to like about avoiding appliance headaches for one year?
The question is: Are they worth it? Post continues after video.
What is a home warranty? When you buy a home warranty, you're basically signing a service contract. The contract states that, for the life of the contract, the warranty company will pay for repairs or replacement on a number of appliances within your home. The contract will spell out which appliances it'll cover, how much you pay per occurrence (similar to a deductible), and what is not covered.
It doesn't cover structural aspects of your home. So if your roof collapses, that would be covered by homeowners insurance. If your water heater leaks, the water heater would be covered (if you bought that coverage) but the subsequent water damage would be a homeowners insurance matter.
Is it worth it? In the six years we've lived in our home, we've had only one incident that would've been covered by a home warranty. Our water heater, which is 20-plus years old, started to leak and needed to be replaced. It's a $400 to $500 job, less if you install it yourself, and I'm sure a home warranty costs more than $80 a year.
Of course, depending on how old the appliances are in your home, it might be something you would consider if you can afford the warranty but probably couldn't afford to replace your refrigerator or stove, if it stopped working.
In general, home warranties are nice to have when you buy a home, as it protects you for a year from unexpected expenses at a time when you can least afford them, but it's usually not advised unless you have extenuating circumstances. (How much house can you afford? Try MSN Money's calculator.)
Note: Home warranties were a subject of a Devil's Advocate post arguing that you should buy that home warranty. There are some compelling reasons in favor of home warranties.
That said, if you ask 10 people about home warranties, you'll likely get 10 different opinions on them. Some people think as I do: Put the savings away in an emergency fund to cover those potential problems. Some people think the peace of mind is worth the extra cost each year.
In the end, it comes down to doing the math after you get some quotes, and finding the solution for you.
More on Bargaineering and MSN Money:
Hey Did Karen Datko write this? What a piece of c&^p.
The author doesn't give any info nor does he pick a side on which he stands.
HHHMMM, I 'll just write 400 words and get paid big money from MSN.
Any tenth grader could write a better article/commentary.
Maybe you could have talked with people that bought a house with a
home warranty or maybe talked with people that sold a house with a home warranty?
Or, better yet, talked to at least one real estate agent who might actually know something.
What happened to actual Journalism?
That's a lot of words to come to a figure it out yourself conclusion.
For a person flying "by the seat of their pants" & really cant afford the home theyre in then a warranty MIGHT get them out of a jam. But in my case as a first time buyer I insisted on having the warranty because I knew I might need it. Sure enough the first time It got cold and we ran the furnace we discovered it wouldnt kick off. We had no insulation at all in our house and our return ducts werent even there! Someone had removed them & covered up all the holes & our inspector politely looked directly at the open furnace filter & never once asked himself "wheres the return ducts that go here".
So we put in a furnace call to AHS because we had lukewarm heat. It turns out poor heat was caused by outside air getting drawn into the open return on the furnace & diluting our heat plus drafts getting around the doors/windows. Long story short it wasnt covered due to "someone else improperly installing the new furnace". So we had "a brand new furnace" all misconfigured & not working properly, a warranty company that wouldnt pay, & the contractor refusing to work with the warranty co. (AHS) for not paying that same contractor for other work.
So in the end I crapped out $2600 to install new ducts then that same contractor who was angry at my warranty Co for non payment on another job did substandard work on MY HOUSE & I had to rip it all back out & do it myself. This is our 2nd year in the house & we still use 2 electric heaters to help our poorly running furnace that the warranty CO wouldnt fix. Also the home inspector just refunded the home inspection fee. He never admitted wrongdoing. Also the seller "Never lived in the perperty" and supposedly didnt know the ducts were fugded up. One big mess. So folks why pay for a warranty if you're going to have to pay for ALL repairs out of pocket anyway! And especially avoid AMERICAN HOME SHIELD like the plague!
Where is this writer from? The cost of replacing a water heater is at least twice what the writer said. A good quality water heater costs $400 just for the unit.
I have had a home warranty for several years..replaced my a/c..out of pocket $800.00 (it would have cost around $1800) the next year I had a problem with my ice maker and they replaced it and then my sink stopped up. I have used it several times and I feel for $400 a year..it is well worth it. My home is updated, but some of my appliances or over 5 years old. They bill me 200 every six months.
Works for me.
I have a home warranty provided when I bought my home. It's a nice perk to throw in with closing, I guess. My problem with this article is if I wanted a definition of a home warranty I could of just looked it up on a search engine. "Do the math and get some quotes"? Thanks for the priceless info. Where should I invest next and should I buy or lease my next car. Oh, I guess this article answered all my financial questions. Thanks again. I feel dumber now.
What a dumb article! You may want one, you may not, I don't know? How did I get any smarter reading this? I didn't. In fact I wasted a minute I will never get back.
I have a 95-year-old Arts and Crafts home and got a home warranty when I bought my house 2 years ago. I got a new dishwasher the first year, a new compressor for my A/C unit after 3 trys to fix it tghe second year and was told I needed a clean out for my sewer that was not covered, since there had never been one. I spent $1000 and $300 in co-pays, and SAVED over $2500 and didn't have to worry about it getting fixed right.
I have no family ot help me with repairs and I am 61. I will re-up next time, too.
American Home Shield is my provider. I have it on 3 different properties. They have replaced central air conditioning systems, inside and out, and various other things. I am way ahead and it makes an out of town rental condo hassle free. If something breaks, it is covered either by A.H.S. or the association, or my insurance.
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