The Advantages and Disadvantages of Home Warranty

Buying a home is one of the biggest investments you will ever make. In most cases, you will invest quite a bit of money out of pocket for things like a down payment, a property inspection, and moving costs. So it may seem like a good idea to invest in a home warranty for your new home, so you won’t have to worry about unexpected expenses for repairs. But is a home warranty really a good investment?

First, it is important to understand that, compared to the other costs involved with purchasing a home, a home warranty is relatively inexpensive. Most home warranties will cost between $300 and $500. This purchase can potentially save you thousands of dollars after you move into your new home, especially if a major appliance breaks down while under warranty protection.

A home warranty is an especially worthwhile investment if you are a first time home buyer. You may not know how to minimize your costs for repairs, so a home warranty can take away the stress of figuring out how to pay for major items.

The down side of a home warranty is that it may not cover all of the items in your home. Outdoor items, such as lawn sprinklers, are usually not covered under a home warranty. Spas and pools are usually also excluded from coverage, unless you add them as an enhancement.

There are other items that are not covered by all home warranty plans, such as faucets, refrigerators, washers and dryers, and garage door openers. Always read a home warranty policy carefully before you commit to a purchase, because if one of the excluded items breaks down, you will still be responsible for the cost of repair or replacement.

Another common problem with home warranties is that you will usually not be able to choose the contractor or repair provider that will take care of a problem you encounter while the warranty is in effect. Typically, if a covered item breaks down, you will submit your claim to the home warranty company, which will choose a service provider with which it has an agreement. The service providers offer discounts to the home warranty companies. You will want to check which service providers the warranty company has selected in your area, so that you can make sure that they are reputable, and can provide repairs in an efficient manner.

Finally, you will be required to pay a “trade service fee” for any repairs made under your home warranty. Although this fee is usually rather small (less than $100 in most cases), you will need to be prepared for this fee in case you have to use the warranty to take care of an unexpected repair.

If you don’t want to have to worry about repairs in your first year of home ownership, a home warranty may be a good idea. However, it is important to evaluate your warranty, to make sure that you will be properly covered.

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