Should You Buy Into a Home Warranty?

Congratulations! You just bought a new house. And lucky for you, it’s equipped with all the major appliances — heating and air, water heater, refrigerator, stove and the works. Now imagine moving in and discovering that one of those appliances doesn’t work.

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You’ve just made one of the biggest purchases of your life and now you’re facing a potentially large bill to replace a major appliance. This is why home warranties are a popular addition to any home purchase.

What is a Home Warranty?

It’s not technically insurance — it’s more like a service contract that covers your major kitchen appliances, electrical, plumbing and heating/air conditioning systems. You know, the important things that turn a building into a home.

Most real estate agents will suggest you either buy or ask for a home warranty from the seller to protect you for the first year that you live in the house. After that year is up, you can elect to buy another year’s coverage.

Are Home Warranties Worth the Money?

The typical home warranty will cost between $400 and $600 for a year. If your seller is providing the first year, then great! You are basically getting a free year’s warranty on your home’s most important appliances.

If you consider the fact that central air can cost upwards of $6,000, a furnace can cost around $4,000, a water heater can cost anywhere from $800 to $3,000 and kitchen appliance repair may run you up to $200, then it’s easy to see the appeal.

Home Warranty Cons

While a home warranty may sound like a great way to fix any problems you run into, it doesn’t come without some catches.

There is typically a limit per year on what a warranty will payout. Furthermore, the company can deny repair if they feel that the item hasn’t been properly maintained. So a home warranty isn’t a great option for anyone who is just looking to avoid the responsibilities of homeownership.

You may not get a say in whether the appliance is repaired or replaced. The company will get to decide that.

Lastly, certain accidental circumstances, such as power surges, may not be covered at all.

New Construction

In general, we do believe that if you are buying an existing structure, a home warranty is a good idea. After the first year, you’ll have a better feel of your home and appliances so you can make a more informed decision.

But if your home is being built for you, then there is likely a warranty from the builder to cover plumbing, electrical, heating and cooling systems. New appliances, while not usually covered by the builder, feature their own warranties.

If you are building a house from scratch, then skipping a home warranty shouldn’t negatively affect you.