Do you need a home warranty? – A Simple Guide

When you’re buying a home, it can feel tedious to realize that there’s another potential item on your to-do list: figuring out whether you need a home warranty.

You wonder what will happen if you find yourself with a broken air conditioning unit on your hands three months after move-in, facing sticker shock at the cost of repairs and cursing your past self for not getting the warranty.

But not so fast – what will a home warranty actually get you, and will that be worth shelling out an extra $400 to $600 a year for coverage? First, it’s important to understand the difference between what a home warranty typically covers versus what homeowners insurance typically covers. 

Home warranties typically cover:

  • wear and tear, maintenance on major systems and appliances
  • heating, ventilating and air-conditioning systems
  • major appliances like your water heater, washer and dryer, and kitchen stove

Homeowners insurance typically covers:

  • damage to your home’s interior or exterior
  • loss or theft of your personal belongings
  • liability for harm to others

While it can feel comforting knowing that major systems and appliances will be covered, there are still a few major drawbacks. Depending on your personal situation, these may or may not be relevant.

  • The commonly used improper maintenance clause can mean that pre-existing conditions or anything that was previously improperly installed may not be covered under your warranty. This might impact you if the home you’re buying wasn’t well maintained by previous owners. 
  • Your warranty company will send a service provider to your home to investigate the problem, which can cost you $50-$150 in service call fees each time. 

  • You give up some control – it’s possible that you may not like the work that the contractor does, or have much choice in the brand or model of a replacement appliance.
  • A warranty company will usually choose to fix rather than replace if at all possible. 

However, this doesn’t mean that you shouldn’t consider getting a home warranty. 

Reputable companies will be clear about what is and isn’t covered, so just make sure you understand what’s in the contract and do research before purchasing a policy to find one that suits your situation. Knowing that major systems and appliances of the home are covered under warranty can be major for peace of mind, especially since repairs and replacements will be facilitated through your provider. And in the case of major repairs, you could be saving your future self a pretty sizeable chunk of change. (Thanks, past self!)

So is it in your best interest to go for the warranty, or not? Here are some helpful questions help you consider what works for your own personal situation:

  • Are you buying a newer or recently remodeled home? Most of the major appliances could still be under warranty and therefore already covered.
  • Have you done your research? Look out for scammers charging low prices for home warranty contracts – find a reputable company and know the terms of the contract including what’s covered and what’s not.

  • Would you rather invest that $500/year into a savings account and handle paying out of pocket yourself for repairs? 
  • Or do you prefer the comfort of knowing that you could be covered for unexpected expenses when they arise?

Ultimately, each situation is unique. Weigh the pros and cons for yourself while considering the condition of the home, what’s covered under your contract, and what will work best for you personally. 

Once you’ve made your decision, make sure to enjoy a moment to bask in the afterglow of ticking one more item of that list of home buying to-dos!

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