Is a Home Warranty Plan Worth it?
My real estate agent highly recommended getting a home warranty plan. It even had its own section on the Residential Purchase Agreement that could be negotiated in the home sale—who pays for the plan, the buyer or the seller.
A home warranty plan is insurance that covers the repair or replacement of the major systems and appliances in your home. Like any insurance, the objective is to pay a little upfront to defray potential larger expenses later. To determine if I felt the cost was worth the insurance, I looked at these items:
- The age and maintenance of the appliances and systems
I had no idea how old any of the appliances were. The home inspection gave me some indicators of items to look at, but no projections on how much longer each system or appliance would last. Since the dishwasher was already broken and a ceiling fan wasn’t working before I bought the house, the home warranty wouldn’t cover those. Because there were so many unknowns, not only of the age of the appliances but also how well everything was maintained, this tips me in favor of getting the warranty plan.
- Reviewing the service plans and contract to see what is covered
Service plans typically cover major systems such as heating, plumbing, ductwork and can also cover repair or replacement of appliances like washer/dryer, microwave and dishwasher. Read the contract to understand what is covered and what isn’t covered. My house didn’t have air conditioning, so that was an additional charge I didn’t need to pay, and I already knew I needed to replace the dishwasher myself. The other appliances looked pretty new and not so high-end that it would be expensive to repair, so it was a toss-up whether I wanted to select a plan with just the major systems or one that included appliances. I chose a plan that included appliances, deciding it was worth the peace of mind in case one of them broke.
- The cost of the service call fee
Service call fees ranged from $50 to $100, sometimes more. This is paid out of pocket and shouldn’t deter anyone from calling if something is broken. Again, it’s important to understand the contract to make sure the item is covered before making the service call.
- Length of the plan/renewable plan
When first purchasing a house, so much money is being spent on so many other things to get the house together, that there may not be enough of an emergency fund to cover every system or appliance if it breaks. A home warranty plan for one or multiple years can be very good for your budget. I decided I’d get a 1-year plan to get me through the first year of the new home, save monthly in a savings account earmarked for home maintenance, and essentially ‘self fund’ any future costs.
Is a home warranty plan worth it? Yes, I think it makes a lot of sense because it limits the potential costs of appliances or major systems breaking at a time when you’re adjusting to new expenses. Whether you get a one year or multiple year plan should depend on how much time you’ll need to save additional cash for a home improvement fund. Nobody hopes to need insurance, but if something breaks, I’ll be glad I have it. And by the time the warranty plan is over, my goal is to have the funds saved to comfortably pay the costs on my own.
