The whole idea behind a home warranty is to protect your investment in the event of the failure of a component of your home likely to result in a significant financial outlay. When you’ve recently purchased a home, a large unexpected expense could be very troublesome.
While you can often find companies selling home warranties on the ‘net, this is not the same as getting an online homeowners insurance quote. Home warranties are very different products, designed to protect you against very different situations. So, with that said, should you buy a warranty for your home?
The Argument for Home Warranties
The home warranty generally covers electrical, plumbing, HVAC and large appliance issues. These can also include washers, dryers, dishwashers, ovens, ranges, garbage disposals and standalone freezers. Proponents of home warranties say purchasing one frees the new homeowner from worrying about paying for unexpected repairs. In most cases, they sell for a set cost, regardless of the age of the home, so even if you’re buying an older home, you can usually get a pretty good deal on one.
What’s more, if bought with the home, the cost can be absorbed within the price of the home and financed along with the purchase. As a result, you won’t feel it as an out-of-pocket expense. If buying the home consumed the bulk of your savings, leaving you with the need to build (or rebuild) your emergency repair fund, a home warranty can act as something of a buffer in the interim.
The Argument Against Home Warranties
However, these products come with a dirty little secret. In order to qualify for a warranty repair, the owner has to prove the malfunctioning system was properly maintained. If you just bought the house, odds are you have no way of doing so. Further, determination of proper maintenance is usually at the discretion of the warranty issuer—which gives them a lot of room to leave you out in the cold. Further, exclusions, deductibles and annual dollar limits can combine to render the warranty basically useless.
Warranties also mean annual premiums even though most years will be incident free. Thus, you’ll be dishing out cash and getting nothing in return. Then, when an incident does occur, there’s a very distinct chance your claim will be denied. Meanwhile, the money you’ve been paying into the warranty could have been building up your emergency repair fund, which could potentially cover the cost of the repair just the same.
Additionally, most warranty companies have their own roster of contractors with whom they work. If you don’t like them, you have little choice but to go along—if you want the repair covered.
So, should you buy a warranty for your home? For many, the risks of a home warranty outweigh the potential rewards. However, there is a lot to be said for the peace of mind you get when you have one in place.
The main thing to remember is home warranties and homeowners insurance are two very different things. Homeowners insurance provides protection against fires, burglaries, and other such maladies. For that reason, the home warranty quote you’ll get on the internet is very different from the homeowners insurance quote you’ll get online at CoverHound.
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