Is a Home Warranty a Good Investment?

When you buy a home, there are some processes and services that are expected, even required during the process before you take ownership. Like an appraisal, a pest inspection, and a structural inspection, as well as a comp report which compares the price that you’re paying for the house to others like it in the area. These are usually required by the mortgage company or may be recommended by your realtor. These aren’t things that are to keep you from buying your dream home, but to make sure you are getting your dream home and not a nightmare money pit.

In that mix of things, often a seller will include a home appliance warranty as part of the deal. This will provide you, the buyer and new owner, a level of protection if something breaks down. This usually covers kitchen and laundry appliances, electrical and plumbing systems, and other items may be included as well like a septic system, spa, swimming pool, etc.

Is A Home Warranty A Good Investment?

But what if a home warranty isn’t offered with the purchase of the house? You can purchase one on your own outside of the mortgage, and there are several affordable home warranty plans available. But that doesn’t answer the question of “are home warranties a good investment?” That can only be answered by asking other questions of the house and the items that you want to be covered under that warranty plan.

A home with older appliances may not make sense to have a home warranty plan. While a home warranty plan will repair or replace items as needed from normal wear and tear, the companies that offer home warranty plans will have limitations on age and models they cover. But when you don’t know the age of the appliances, electrical, or plumbing systems that you’ve inherited with your home purchase, a cheap home warranty plan can prove to be of great value if the HVAC system quits working or the water heater goes out.

 If you have ever owned a home before and had to pay for repairs or buy a replacement appliance like a refrigerator or washer and dryer, then you are aware of how much these can cost. Homeowners overall spent an average of 9.6 percent of their incomes on home improvements and maintenance in 2019, and most do not have room in their budget for unexpected expenses like these.

What Should A Home Warranty Cover?

The broad definition of a home warranty plan is a “service contract” for the kitchen and laundry appliance and the electrical and plumbing systems that are within the home. They are covered to be either repaired or replaced if failure is due to average wear and tear.

So the question, “Should I get home warranty” plan is yes. Even a cheap home warranty plan is better than no home warranty plan, no matter how little you paid for the house and property. The coverages vary between every warranty company and the cost are different as well. You should read the fine print and ask questions if you don’t see something covered that you want to be covered or don’t understand all the statements within the plan. The typical home warranty plan will include the following:

HVAC systems, but the ductwork may not be included:

• Electrical systems
• Plumbing systems
• Washing machine and dryer
• Dishwasher
• Stove and oven
• Refrigerator
• Garbage disposal
• Water heater

The Home Warranty Pros and Cons

Like anything that you can purchase, there are pros and cons with home warranty plans as well. For the most part, there are more benefits for a homebuyer to have a home warranty plan because it provides an assurance that if anything goes wrong, there is no need to worry about the expense to repair or replace it.

However, if you are buying a new-built home, purchasing a home warranty plan doesn’t make sense. The appliances and systems within a new-built home are covered by the home builder and then by the manufacturer. The home warranty plan won’t be a smart investment until those warranties have expired.