Home warranties: what are they and are they worth it?

Home Warranties: What You Need to Know

A home warranty can be a helpful addition to a homeowner's protection plan, offering reassurance in times of unexpected breakdowns and appliance failures. In this blog article, we will explore the ins and outs of home warranties, including their pros and cons, contract limitations, pricing considerations, and whether they are worth the expense.

What is a Home Warranty?

A home warranty is a service contract that covers the cost of repairing or replacing home appliances and systems that break down due to normal wear and tear. Home warranties typically provide coverage for:

• Appliances (e.g., refrigerators, washers, dryers)
• Plumbing systems
• Electrical systems
• Heating and air conditioning systems

These warranties are often purchased when buying a home, but they can also be obtained by homeowners at any time.

Pros and Cons of Home Warranties

Pros

• Peace of mind: A home warranty provides a safety net for homeowners, alleviating the worry of unexpected repair costs and helping them budget for potential issues.
• Convenience: With a home warranty, you typically have a single point of contact to report a problem and arrange for repairs. This can save you time and effort in finding reliable service providers and scheduling repairs.
• Possible savings: In some cases, the cost of the home warranty may be less than what a homeowner would spend on repair or replacement costs for covered items.
• Transferability: Home warranties are often transferable to the new owner if you decide to sell your home. This can be an attractive selling point and potentially increase the value of your property.

Cons

• Coverage limitations: Home warranties often have coverage limitations, such as caps on the amount the warranty company will pay for repairs or replacements, as well as exclusions for pre-existing conditions or improper maintenance.
• Service quality: The warranty company may not always use the highest quality repair services or contractors, potentially resulting in subpar repairs.
• Additional costs: Homeowners may still need to pay a service fee or deductible for each repair, adding to the overall cost of the warranty.

Contract Limitations

Before signing up for a home warranty, it's essential to review the contract carefully. There are numerous reasons why your home warranty claim could potentially be denied. It’s critical to review the contract thoroughly to understand any limitations and potential hidden costs. Common limitations to be aware of include:

• Coverage caps: Most warranties have limits on the amount they will pay for a repair or replacemadditional service fees or deductibles ranging from $75 to $150 per repair, which could leave the homeowner responsible for covering the remainder of the cost.
• Exclusions: Not all appliances or systems are covered, and the warranty may have specific exclusions for certain items or issues.
• Pre-existing conditions: If a system or appliance has a known issue prior to the warranty coverage, it may not be covered.
• Improper maintenance: Home warranties may not cover repairs if the homeowner did not properly maintain the appliance or system.
• Not a substitute for homeowners insurance: homeowners insurance is typically mandated by the mortgage lender and that coverage protects against losses incurred if your home or belongings are damaged due to specific perils defined in your policy. Specifically, it protects you financially from injuries or damage to your home and its contents. Conversely, a home warranty acts as a service contract that offers specific repairs or replacements usually on appliances and home systems.

Pricing Considerations

The cost of a home warranty can vary based on coverage options, the size of the home, and other factors. On average, home warranty service fees or deductible costs add up to an additional $75 to $150 per repair.

When considering a home warranty, it's essential to weigh the potential costs against the potential savings and the value of the peace of mind it provides.

Are Home Warranties Worth the Expense?

The value of a home warranty ultimately depends on the individual homeowner's needs, preferences, and financial situation. For reference, the cost of a typical home warranty on a typical 2,000-square-foot home ranges from $644 to $737 for a one-year plan. For some, the reassurance and convenience of a home warranty are well worth the cost, while others may prefer to save money and handle repairs themselves or with their preferred contractors. 

Our suggestions are:

1. When shopping for a home warranty, make sure to research the warranty providers to compare coverage options, pricing, and overall customer satisfaction. Look for reputable companies with a good track record of happy customers. 
2. Read the contract carefully and make sure you understand all the terms, conditions, and limitations. Pay attention to any fine print and ask for clarifications if needed.
3. Evaluate the age and condition of your appliances and systems. Consider the age of your appliances and systems before purchasing a home warranty. Older items are likely more prone to breakdowns, making a warranty more valuable (provided the older appliances and systems are in coverage). Newer appliances and systems may still be covered by manufacturers’ warranties making a home warranty purchase less attractive.

Regardless of your feelings on home warranties and if they are right for you, you can still depend on Moatkeeper to help you organize and plan the preventative maintenance on your property to avoid headaches and unexpected maintenance emergencies.