Do You Really Need a Home Warranty?

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As a homeowner, you typically have homeowner’s insurance to protect your property and possessions in case of unexpected events, like fires or theft. However, those policies don’t cover any costs associated with wear and tear damage and related repairs and replacements in your home. For that type of protection, a home warranty is usually necessary.

However, many homeowners wonder if they really need a home warranty. If you’re among them, here’s what you need to know about the pros and cons of home warranties, as well as how to decide if one is right for you.

Pros of Home Warranties

Usually, the biggest benefit of a home warranty is that the service contract can potentially limit your out-of-pocket costs for specific repairs. Generally, the service contracts cover whole-home systems, major appliances, or both, all of which can be expensive to repair or replace if there’s a wear and tear-related failure.

In total, the average amount a homeowner spends on maintenance and repair costs annually typically comes out to approximately 1 to 4% of their home’s value. Additionally, single system failures – and the subsequent replacements – can have price tags far above that amount. For example, on average, repiping a house runs $7,500, but it may cost $15,000 or more for some properties. With a home warranty, covering those expenses out of pocket is potentially unnecessary, as your service contract may handle it.

Home warranties also give you access to service technicians directly through the plan, eliminating the need to track down a provider on your own. This can also keep you from having to compare prices, as your service fees are typically set through your policy.

Cons of Home Warranties

When it comes to the drawbacks of home warranties, the most significant is usually the coverage limits. Only the systems and appliances listed in your agreement are covered. Plus, certain exclusions and limitations can apply.

For example, structural elements of your house – such as the foundation and roof – usually aren’t covered. Additionally, you won’t get help if you need to change your plumbing or electrical to support a new optional installation not related to a wear-and-tear failure.

Finally, home warranties can limit your choices when it comes to providers. As a result, you may not get to work with your top choice, and you have to wait for work based on the chosen provider’s availability and schedule.

Who Should Get a Home Warranty?

Whether a home warranty provides enough value does depend on your situation. If you have an older house with aging appliances and systems, repairs or replacements are likely coming up quickly. In that case, a home warranty is potentially beneficial.

Similarly, if you have limited funds to handle high-cost repairs or replacements, a home warranty may give you peace of mind until you can build your savings. If you’re not comfortable tracking down technicians on your own, then a home warranty makes getting the work you need handled more straightforward.

However, if you have ample savings or are covered by a new home builder’s warranty, an appliance manufacturer’s warranty, or similar focused warranties, adding a home warranty is potentially unnecessary. Finally, if you’d rather have complete control over who handles the work, then a home warranty isn’t always the best choice.