Is It Worth It To Buy A Home Warranty After Moving Into Your New Home
Over the last few decades, we’ve seen a relatively new industry pop up, and a new bill for homeowners. Home owners are inundated with offers of home warranties, but they are confusing, and sometimes confounding. What are home warranties, and are they worth the money?
The phrase “home warranty” is a bit misleading. Home warranties do not warranty your home’s structure. If your roof needs replacement, or if more rain is coming into your house than outside, that lies either with your homeowner’s insurance, or, in many cases, your own pocket. If your home is broken into, you’ll have to file claims with your insurance company, not your home warranty.
What does a home warranty cover?
A home warranty covers the appliances in your home. If your water heater or your dishwasher stop doing their jobs, your home warranty will cover repair or replacement. Home warranties cover:
- Plumbing systems
- HVAC units
- Electrical systems
- Washing machines and dryers
- Garbage disposal
- Ovens and stovetops
- Dishwashers
- Refrigerators and freezers
- Water heaters
Drawbacks
If you moved into a new home, or a newly renovated home, a home warranty may not be worth it. The average cost of a home warranty is about $600 per year, and some plans can cost over $2,000 a year. Surprisingly, California is among the lowest priced markets, averaging around $500 a month. Plans vary. Condos are cheaper than single family homes. An older home can be more expensive than a newer one. Some cover just appliances while others cover systems within the home. Deductibles range from $0 to around $125. If your appliances and systems are within the manufacturer warranty, a home warranty is a waste of money, but if they are a bit older, a warranty might not be a bad idea.
There are some caveats to their coverage. If your appliances or systems are poorly maintained, your home warranty policy might not cover them. If they have too much wear and tear (so they don’t cover all older appliances) or if the installer installed them incorrectly, you may have to pay.
Do your homework before choosing a home warranty company. Rates and coverage vary. Surprisingly, many have good reputations with Consumer Affairs. Check with:
- Better Business Bureau
- Your state attorney general’s office: Find yours from the National Association of Attorneys General.
- Your state insurance commissioner: Locate yours with the National Association of Insurance Commissioners map. Although home warranties aren’t insurance policies, many states require companies offering warranties to register or be licensed by the state’s department of insurance.