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Home Buying, Mortgage & Home Buying, Article

Is a Home Warranty Worth the Cost

Is a Home Warranty Worth the Cost?

If you’re currently in the home-buying process, one of the (many) decisions you’ll have to make before you close is whether you want to add a home warranty. This type of service plan can cost anywhere from $300 to $600 per year, and will cover the repair, — and if necessary, replacement — of major appliances, electrical wiring, and some plumbing. 

If the house you’re purchasing is new, you can probably skip the warranty because everything should be in tip-top shape and the annual investment likely wouldn’t be worth it. But if the home is more than 10 years old, a home warranty may provide some savings, or at least peace of mind when a repair is needed that wouldn’t be covered by homeowners insurance (which is for unforeseen circumstances like fire, water damage, or theft). 

Why a Home Warranty Might Be Worth It
A home warranty can offer peace of mind after you close on the sale of your house and can no longer ask the former owners to make repairs. If an appliance breaks after a month, or your electrical goes kaput, or some other repair arises that you wouldn’t have known about from your home inspection, the home warranty can be a saving grace.

How it works:

- You call your home warranty company to file a claim.
- They search for a reputable service company in your area.
- You make an appointment with the service company.
- The service company assesses the issue and makes a recommendation to repair the item or replace it.
- You pay the flat service fee (typically about $50 to $75).

If it’s a covered repair, your home warranty will pick up the tab for the rest of the costs and all you pay is the service fee — which could result in thousands of dollars saved.

Why a Home Warranty Might Not Be Worth It
If the home you purchase is in great condition with “good bones” and newer major appliances, you could pay years on a home warranty and never make a claim, which means you’d have spent hundreds of dollars each year with no return.

Another complaint people have with home warranty companies is they’ll continue to repair rather than replace an old appliance. But that means you may be stuck with unreliable equipment and have to keep paying the service fee every time it breaks. In addition, even if you do get the green light for a replacement, it may not be the brand you desire.

But the biggest reason a home warranty might not be worth it is if the contract doesn’t cover the items in your home that need repair. Not all service plans are created equal. For example, some warranties require an additional charge if you want your air conditioner to be included in the coverage—likely because that’s a high-priced item to replace. Too often, warranty subscribers are shocked when the company denies their claim and they’re stuck footing the bill, even as they continue to pay that annual warranty fee.

Bottom line: it’s important to do your research and then read your contract carefully to ensure as many of your likely-to-need-repair items are specifically listed. Then, ultimately, you have to determine if your peace of mind is worth the annual cost. Many proponents say they like not having to research repair companies and contractors when something breaks. They let the warranty company do the job and save them the hassle. If that sounds like you, then maybe a home warranty is worth it. But if you’re handy and can troubleshoot minor home repairs yourself, or you have a good stable of reliable, affordable repair companies, this is one page of the home-buying contract you might not need to sign.

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