Home warranties may feel like a catch-22: They can offer some financial protection in case something big breaks in your house — think a major appliance or your heating and cooling system — but they also add an extra cost to your monthly budget. And they do not always cover everything.
The good news: If you are weighing a home warranty, there are some clear considerations that can make the whole decision feel a bit less like guesswork. Here is what to know.
What do home warranties cover?
In short, a home warranty “covers appliance and system repairs related to wear and tear from everyday use,” said NerdWallet. This can include large appliances like your washer and dryer, refrigerator, dishwasher and garbage disposal, or systems such as plumbing, heating, A/C and the electrical system.
What a home warranty will not cover is “your home’s structure, foundation, walls or workmanship,” said RocketMortgage. It also will not cover systems and appliances under certain conditions, such as if the item was not “specifically listed in the contract,” or if the breakdown is due to a “problem that predates the contract” or “from anything other than regular wear and tear.” Same goes for if the item was “modified or installed incorrectly” or “you made the problem worse by trying to fix it yourself.”
When is a home warranty worthwhile?
On a “strictly financial level, home warranties have the potential to pay for themselves if covered items malfunction and need repairs or replacements cost more than what the customer pays for the plan premium and service fee,” said Forbes. But because you cannot predict what unexpected home repairs may arise, or when those issues may occur, home warranties are “generally best for homeowners who have appliances and systems reaching the end of their lifespans,” said Forbes.
Same goes for if you recently bought a home and are not totally sure of the status of various systems or appliances. In these scenarios, having a home warranty can make your future repair bills a little less unpredictable.
Just bear in mind that “there could also be a preexisting condition — even if it wasn’t evident to you when you bought the home warranty — that allows the provider to deny coverage,” said Consumer Reports. This is another gamble of these warranties. There is also a risk if anything is too old, as “many home warranties pay less to repair or replace older items through a process known as depreciation,” said NerdWallet.
When should you skip a home warranty?
A home warranty generally will not be worthwhile if you already have protection in place. For instance, “new-home appliances may already be covered,” and “even if your appliances aren’t new, they may still be under warranty if you made the purchase with a credit card” since some cards “extend warranty length,” said Consumer Reports.
It is also worth noting that when you request a repair under a home warranty, you may only be able to work with a technician in their network, rather than your preferred repair person. In some cases, “you might have to wait longer for appointments than if you’d hired a repair company on your own,” said NerdWallet.
Finally, there is the ultimate risk: “You may pay for it for years without actually using it,” said Forbes. Or you might pay for it, only for the repairs you end up needing not to be covered.