Do You Really Need A Home Warranty Plan? Here's What To Consider

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

If you are reading this article, then chances are that someone has either tried to pitch a home warranty plan to you or you’ve read about how it could be the best financial decision you will ever make. Although having a safety net against expensive and unforeseen repairs definitely sounds like a good idea, that doesn’t automatically make a home warranty the best fit for you. Here are a few things you need to consider before you purchase one.

What is a Home Warranty?

As a homeowner, you become financially responsible for fixing your appliances and systems, such as your washer, refrigerator, furnace, HVAC, or plumbing, once the manufacturer’s warranty expires. A home warranty provides for replacement service and discounted repairs on your home’s major systems and appliances should anything go wrong.

For instance, let’s assume you bought a dishwasher ten years ago. It is possible that your machine is no longer covered by the manufacturer’s warranty. Sadly, you wake up one morning to discover that the rotating arms that spray hot water and detergent are no longer spinning. At this point, your washing machine is good as useless. You decide to call a technician from your local repair shop to fix it, and you end up spending $200 replacing the faulty component and on service charge.

On the flip side, the technician may not be able to fix your dishwasher. In this case, you may have to spend between $600 and well over $1,000 on a new machine. In addition to having to pay the technician to assess the fault, you will need to spend some more on a new dishwasher if you don’t have a home warranty. However, you’d have a completely different experience if you had a home warranty.

With the right kind of protection, you only need to be up to date on your monthly payment to the home warranty company. In exchange, they’ll have a qualified technician look at your faulty dishwasher. If it is something the tech can fix, the warranty company pays for it. And should you need a new appliance, the company will also handle the cost.

It is worth mentioning that a home warranty is quite different from insurance. While home insurance covers major hazards such as fire, thefts, or certain types of water damage that could affect the building, it does not cover repairs on your appliances. The cost of fixing these appliances, although expensive, would not reach the insurance’s deductible (that is, the cost at which the insurance coverage kicks in). Home warranty coverage, on the other hand, takes care of the cost of repairing or replacing an appliance or system.

How Much Does a Home Warranty Cost?

A home warranty plan costs a monthly premium of between $55 and $100 on average. This price could vary based on the warranty company in question, the property type (single-family detached, condo, townhouse, or duplex), and the kind of plan you choose. And although most plans will cover your basic appliances, you can opt to purchase one or more additional components to increase your coverage at extra cost.

In addition to the monthly or annual premium, the warranty company will charge a service call fee of between $75 and $125 every time a technician or service provider visits your house to examine a problem. If the problem requires more than one type of contractor, you may be required to pay the service fee for each. For instance, if you need to get both your alarm system and dishwasher looked at, you would have to pay two service fees since both repairs require the skills of two different technicians. On the flip side, you would only pay one service fee if a technician is working on your dishwasher and refrigerator since the same person can work on both.

To wrap up this section on cost, it is important to reiterate that having a home warranty doesn’t necessarily mean that you won’t spend a dime on home repairs. Some fixes would not be covered by the warranty, either because the company does not offer coverage for that item or because you didn’t purchase the option.

Is a Home Warranty Right for Me?

Having known what a home warranty is, the next important thing is to decide whether or not you need one. Depending on who you are and your lifestyle, a warranty could help you save some money. You should consider purchasing one if you fall into any of the categories below.

You’re not a DIYer

While some people have the ability to fix anything from a faulty TV set to a leaking kitchen sink by watching YouTube videos, not everybody possesses this rare gift. If you don’t have the skill set to repair some of your home appliances, then you probably need a home warranty.

You have a very busy life

Even if you are a handyman, fixing faulty equipment could take anything from a few minutes to several hours or even days. This may not be possible if you have a busy life. Trying to fit a repair into your already busy life could increase your stress levels and leave you with an even more expensive repair bill if you make a mistake.

You are on a tight budget

An appliance can go bad at any time. When you think about the cost of fixing them, having a safety net in the form of a warranty could be your best bet.

Imagine waking up to a bad air conditioning unit that needs to be replaced. You could be looking at an unexpected cost of $3,000 to $8,000. Without a home warranty, you may be forced to borrow or take out a loan if you are on a tight budget.

You have older appliances

As already mentioned, you become financially responsible for all your repairs the minute a manufacturer’s warranty expires. If your appliances are older than ten years but still working, it makes a lot of sense to purchase a home warranty.
 

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The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.