Should You Get a Home Warranty? Everything You Need to Know (And How it Differs from Home Insurance)
Being a homeowner can be expensive, from the mortgage payment to maintenance. That’s why you might be interested in knowing about a home warranty, which is a policy that can help you save on routine repair bills for the systems and appliances in your home. Let’s find out what a home warranty covers and why you might want one in addition to comprehensive homeowners insurance.
What is a Home Warranty?
While coverage will differ by company, a home warranty typically includes the most common systems and appliances in your house.
Systems that are usually covered include the plumbing system, electrical system, and HVAC components, like the air conditioning, heating system, water heater, and ducts. Your appliance policy normally includes your kitchen appliances, down to your ice maker and garbage disposal, your washer and dryer, your exhaust fans and ceiling fans, and even your doorbell.
That means if your hot water heater cools down or your refrigerator warms up, a home warranty will take care of the majority of the costs associated with repair or replacement. Of course, each policy will have different exclusions and coverage limits, so it’s always important to read the fine print before committing.
How does a Home Warranty Differ from Homeowners Insurance?
You’re probably wondering how a home warranty is distinct from what’s already covered under a homeowners insurance policy. Here are three key differences:
- Your mortgage lender will require you to have home insurance, where a home warranty is optional.
- Homeowners insurance protects the home’s structure and contents in the case of incidents like weather events, accidents, or theft. But it won’t cover routine breakdowns caused by normal wear and tear.
- A home warranty can be transferred to a new owner, whereas insurance cannot.
Benefits of a Home Warranty
The main benefit of a home warranty is peace of mind. If you’re a new homebuyer, you might opt for a home warranty for the reassurance that you won’t have an unpleasant surprise from something that wasn’t noticed in the home inspection. It can relieve the constant worry that you might have to shell out a lot of money for a replacement plumbing system if your pipes give out, or to repair a faulty ice maker even if the rest of the refrigerator is working perfectly.
A home warranty can be an especially great deal if you have an older home or appliances that are no longer covered under the manufacturer’s warranty. Many home warranty companies don’t differentiate on the cost for a warranty based on your home’s age. That can be important for older properties since you know it’s likely just a matter of time until something breaks down.
Drawbacks of a Home Warranty
There are some things to be aware of when choosing a home warranty that fall into two main categories:
- Coverage: Make sure to consider the limits. While your main systems and appliances are commonly included, you’ll want to read the fine print to make sure it protects everything you think it does. For example, many don’t provide for more than one of each type of appliance, so if you have a second-floor air conditioning unit or a garage fridge, those might be excluded. It also is unlikely to take care of cosmetic damage and appliance accessories or fixtures.
- Out-of-pocket costs: The home warranty also might have a cap on how much it will pay out, which could include a per-item cap, such as $2,000 for an oven, as well as an annual cap for all claims. It also typically does not cover the service call fee for the repair person who comes out to diagnose the problem, and you may have a deductible as well.
Should I Get a Home Warranty?
That answer will differ for every person. If you prefer the assurance that comes with knowing many of the appliances and systems in your home are protected, then a home warranty might be for you. You can read sample contracts to see their inclusions and the amount that you will be responsible for, in premiums, deductibles, service fees, and the like to compare options.
However, another possibility is to take the money you would devote toward the home warranty premium (which can run about $25 to $50 a month) and put that money in a dedicated savings account to tap when and if your home needs a repair — even one that otherwise would be excluded by a home warranty.
Whether or not you get a home warranty, you should never skimp on your homeowners insurance. But that doesn’t mean you should overpay. To find out whether you have the best possible rate, let Matic create your own personalized quote so you can begin saving today.