You’re buying a home and offered the option to purchase a home warranty. Sounds like a no-brainer, right? Not exactly. Truthfully, a home warranty can have its benefits but there are also many drawbacks. Let’s take a closer look whether or not you should get a home warranty.
What Is a Home Warranty?
A home warranty is a contract that will cover needed repairs in your home. Many people opt to get a warranty to avoid dipping into their savings account to pay for repairs or to prevent having to hunt down a contractor. Much like insurance, a home warranty is either paid in one-lump sum each year or divided into installment payments. For many homeowners, a warranty can offer peace of mind.
What Does It Cover?
Each home warranty is different. Most cover major components of your home, such as plumbing and electrical as well as heating and cooling systems. Others may cover appliances as well. You will need to read the fine print to determine exactly what the coverage offers.
How Much Does It Cost?
As mentioned above, you will be charged a premium that is either paid once a year or in installments. The exact price will depend your property. The premium is usually a few hundred dollars a year. What you also need to realize is that a service fee is charged when one of the company’s repairmen come to your home. This is an additional charge that you need to be aware of.
What Are the Pros and Cons?
For many, a home warranty offers peace of mind. It’s great knowing that should something break down it will be covered. But will it? Proper maintenance must have been done in order for the company to pay. This is a problem if you’re buying an older home and the previous owners neglected to care for it.
Another benefit is not having to look for a contractor. Again, this also has a downside because you’re not given the ability to choose your contractor (and your options may be limited due to where you live). There’s also the benefit of only paying the service call fee should you need a repair. However, you may find that your repairs aren’t covered.
Another drawback is that you may go years without needing a service call. You’ll have the peace of mind, but nothing else to show for it.
Should you get a home warranty? It really depends. If you’re buying a brand-new home, it can make a lot of sense. If you’re buying a used home, you have no idea if it was well taken care of or not. You also have to deal with the fact that you may not utilize the warranty. That means paying hundreds of dollars for peace of mind. It might be better to put that money into an emergency fund for your home.