Typically based on an annual subscription, these plans cover the maintenance costs on household goods such as refrigerators, ovens, and dishwashers—although this list is by no means exhaustive.
We outline 10 reasons a plan could be beneficial for your finances and suggest 3 instances in which these policies may not be right for you.
10 reasons you should have home warranty coverage
1. Peace of mind
For many of us, the cost of repairing or replacing a major household system or appliance would simply be unaffordable. If you have a valid home warranty plan, however, your provider will step in to meet these costs once you have paid your service fee: the one-off payment you make every time you book a repair. From a psychological perspective, the reassurance of knowing you have this protection in place can be invaluable.
One word of caution: most policies include payout caps on certain items or an aggregate cap for your policy, which means you can only claim a certain amount per item or a set total amount during the term of the plan.
2. Licensed tradespeople
Finding a reliable contractor with relevant expertise is rarely easy, especially if you’re new to an area or have little knowledge of home maintenance. Most home warranty companies work with their own network of fully screened contractors, which should ensure the person who enters your home has been properly vetted by the appropriate authorities.
As your tradesperson should also be fully licensed, you will be protected against legal liability if something were to go wrong as a result of the repair. Be aware, unlicensed contractors are unlikely to qualify for their own liability insurance.
Although the size of these networks may vary, several nationwide companies work with networks of more than 40,000 tradespeople.
When you book a service, most home warranty providers will call a tradesperson from their network to schedule a repair. If you’re leading a busy life, this could drastically reduce the amount of the time and effort you need to devote to arranging a repair.
Although many home warranty providers allow you to book a service 24/7, there may be a waiting time before the company contacts a tradesperson to arrange the visit to your home. This waiting period is typically between 2 and 4 business days—although some companies will expedite the process in the event of an emergency, such as the loss of electricity in your home.
4. The work is guaranteed
Quality and durability are, of course, a top priority when it comes to home repairs. If you arrange a repair through a home warranty provider, the company will normally guarantee the parts and labor for a set period. In most cases, this means you’ll be able to arrange another service call free of charge if the item fails again within this timeframe.
Although the length of this guarantee may vary, it is typically between 30 and 90 days, while certain companies guarantee the work for the lifetime of your plan.
5. You’re selling your property...
If your property is on the market, having a home warranty plan could prove extremely attractive to potential buyers who may have concerns about the systems and appliances they’re inheriting. Many home warranty companies allow customers to transfer their policies to a new owner following the sale of a property, while others offer specialist coverage for those in the process of buying or selling a home.
In certain cases, having this type of coverage may even place you in a stronger position when you’re negotiating over price with your home’s new owners.
6. … or buying a new home
With moving costs, downpayments, and mortgage fees, buying a home can be incredibly expensive. You might therefore want to consider purchasing a policy if you would struggle to absorb the cost of replacing a household item on top of these other expenses. This could be especially relevant if a home inspection report has raised concerns about the age of certain appliances in the property.
Be aware, it’s wise to check the fine print carefully to ensure you’ll be covered for older items as a number of providers exclude systems and appliances over a certain age.
7. You’re renting out your home
If you’re planning to rent out your property, having a home warranty plan could be a huge selling point for potential tenants. Knowing you are invested in protecting the systems and appliances in your property sends the message that you are a responsible landlord who genuinely cares about your tenants’ living conditions.
Although policies vary, some providers allow a third party such as a tenant to file a service request in your property, which could speed up the repair process if, for example, an item breaks down while you are on holiday.
8. To complement your home insurance
Although many people mistakenly believe home insurance and home warranties offer the same type of protection, this is not the case and the two should never be viewed as interchangeable. While home warranties cover the maintenance of household appliances and systems, home insurance covers damage caused by events such as break-ins, earthquakes, and fire. While home insurance is often a mandatory requirement when you take out a mortgage, a home warranty plan is entirely optional. If you would like the most robust protection possible, the safest course of action would be to take out both types of coverage.
9. Exclusive discounts and benefits
A number of providers offer home warranty customers discounts on other services they provide but which are not included in the home warranty coverage, such as handyman services and smart TV installations. Other providers offer incentives such as Amazon vouchers as part of refer-a-schemes, which reward customers who recruit others to the service. If you’re a DIY novice, you may also receive access to home repairs and maintenance guides if you take out a home warranty plan.
Remember, you should never allow exclusive benefits to unduly influence your decision-making process when choosing a provider. Although these benefits can be attractive, having the right level of coverage should be your main concern.
10. No hidden fees
When you take out a home warranty plan, you’ll pay the cost of your premiums, either upfront or on a monthly basis, and when you make a claim, you’ll pay a one-off service fee, the amount of which is set out when you take out a plan. This transparency and certainty could be ideal for those on a tight budget who need to organize their finances meticulously.
Note, many companies will also impose a fee if you decide to cancel your plan, although the amount of this fee should be outlined in the terms and conditions of your coverage.
3 Reasons Not to Get Home Warranty
1. The items in your home are in poor condition
If you haven’t correctly cared for the items in your home, you may find yourself unable to claim on your warranty plan. Almost all home warranty plans specifically exclude items that haven’t been properly maintained. Likewise, the vast majority of companies will not cover pre-existing conditions on your items, whether these were known or unknown when your coverage began.
Another point to bear in mind: most companies include a waiting period, which means you won’t be able to make a claim until you have had your coverage in place for a specified amount of time: often 30 days.
2. Exclusions still apply
When choosing your coverage, you should note that your provider will cover the items specifically named on your policy and those only. Many companies offer certain plans aimed toward systems and others focused on major appliances.
Further, many companies will also specifically exclude repairs for certain types of damage such as that caused by rust or corrosion, pests, or acts of God.
If you would like to include additional goods on your plan, you should investigate any optional extras offered by the provider as most home warranty companies will allow you to expand your coverage for an extra cost.
3. You already have a financial safety net
While home warranty plans could provide essential protection to those who would struggle if they faced a major expense, this type of coverage may not be necessary if you have sufficient savings to cover such costs.
Take an honest look at your finances and ask yourself if you have an adequate emergency fund in place should disaster strike. Like with all financial decisions, it always helps to bear the worst-case scenario in mind. Ask yourself if you could cope if your built-in oven, sump pump, and HVAC all failed at once. If the answer is yes, home warranty coverage may not be for you.
Whether you’re seeking financial security or a sense of reassurance, there are numerous reasons to take out a home warranty plan. And as long as you understand exactly what your plan covers, you can easily avoid any nasty surprises if you need to make a claim.
One golden rule: always ensure you keep on top of the payments on your policy as failing to do so could leave you without coverage in the event of an emergency.