February 7, 2019

The Truth Behind Home Warranties

It seems that everything comes with a warranty these days. You are in the checkout line at Walmart buying a $30 beard trimmer and the clerk asks if you want to spend another $15 dollars on a 2 year warranty- we’ve all  had to weigh out this scenario. “Is it worth it?”

When you start shopping for a new home, you may feel the pressure of protecting such a big investment and might be glamoured by listings that offer a home warranty. Before you invest in a warranty, you need to need to be sure if it is really worth the money. Having a warranty may give you peace of mind but it never hurts to be educated on the subject. Take some time to read over this blog to learn the in’s & out’s of home warranties.


What is a Home Warranty?

A home warranty is a service contract to cover the cost for repairs or replacements of home appliances, plumbing, and HVAC systems. It sounds nice but there are catches and limitations to consider. Home Warranties typically cover things that your home insurance policy miss. However, you will most likely still have some out of pocket expenses.


Know What You’re Paying For

When you purchase a home warranty you are basically buying an insurance policy. Remember this tidbit because insurance companies are in the business to make money. They expect to make commissions from the policies they sell.  Think of it this way, around 85% of the cost for a home warranty is profit, commission, overhead, and marketing costs. That leaves you with around 12% for the cost of the average item breaking down within the lifespan of the policy. So in hindsight, these policies are costing you much more than they are worth.



The costs all depends on the plan and provider you decide to go with. There are essentially three kinds of plans: a home warranty for one specific item, one for all of your appliances, and one for all of your appliances along with plumbing and electrical systems. As you can gather, the more you sign up for the more expensive it will be.


Read the Fine Print

Warranty providers will make loop holes in their policies, making it easier for them to not make payments for repairs. Many consumers complain their policies are not paying what they expected or not covering non-mechanical components of your home such as windows. Some  providers have made wiggle-room in their policies making it possible to exclude one part of an appliance (ie. the ice maker on your refrigerator) or to not pay at all (particularly with unknown preexisting conditions or appliances the break under particular circumstances). So be prepared, stay informed, and read the contracts very carefully!



What’s a good alternative for home warranties? Being self insured. It’s the only sure-fire way to make sure you’ll be fully covered when the time comes to replace and repair. It’s as simple as setting up a savings account dedicated to repair and replacement expenses. You can still keep your peace of mind without the hassle of buying a warranty that may not even cover the costs. Another thing to check is to see if the items in your home already have a warranty. Most refrigerators, washers/dryers, and other large expenses will come with a manufacturer’s or builder’s warranty so be sure to not over look them!


In Conclusion

Now that you are more enlightened on the subject, decide for yourself whether or not a home warranty is right for you. Just be aware of all that encompasses and stay informed at all times on the matter. Knowledge is power so stay a step ahead!







Never Buy a Home Warranty by Dave Ramsey

Home Warranties: Are They Worth It? – Getting Real by Lucid Realty, Gary Lucido

What to Know About Buying a Home Warranty by Consumer Reports, Anthony Giorgianni


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