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Do You Need a Home Warranty? 3 Things to Consider

Estimated reading time: 3 minutes

Owning a home means making big decisions about how to protect your property and manage costs over time. Most homeowners carry homeowners insurance because their mortgage lender requires it, or simply for their own peace of mind. But you may also be wondering if a home warranty is a good way to supplement your insurance and give you an added layer of protection against the unexpected.

Here are some things to consider as you decide whether a home warranty plan is right for you.

Need a home warranty? Know what’s covered

While your homeowners insurance covers damage from events like natural disasters and property crime, a home warranty is focused on helping you maintain your home’s systems and appliances. In the event of a covered breakdown, your warranty gives you an affordable way to get a repair or replacement, and eliminates your hunt for a contractor.

Home warranties typically cover systems like HVACs, plumbing, and electrical, as well as appliances like refrigerators, dishwashers, washers, and dryers. Your homeowners insurance typically won’t cover these types of repairs. What warranties can cover can also vary. For example, a basic warranty may cover things like your water heater but not appliances like your refrigerator. You may need additional coverage for that.

Consider the age of your home

When buying an older home that wasn’t updated by the previous owner, keep in mind that you’re inheriting appliances that have accumulated some inevitable wear and tear over the years. And, even newer appliances can fail.

As Consumer Reports notes, the typical manufacturer’s warranty on a household appliance only lasts one to two years, so most of the appliances in your preowned house are probably no longer covered. An exception to this rule may be if your home’s previous owner purchased a home warranty for you as part of the home’s sale.

Consumer Reports also found that over 20 manufacturers stated their appliances should function for approximately 10 years, but that’s not a guarantee against breakdowns. This could be an especially hard lesson to learn if a younger, big-ticket item breaks down and it’s not covered.

Think about your monthly budget

The average home warranty will incur premiums that should cost you about $360–$540 a year, according to Consumer Affairs. On top of that, when you need to make a service call to address an issue with an appliance or system, the average cost per service call is about $55–$150.

Because replacing an expensive system like an HVAC could set you back thousands of dollars, the annual cost of a home warranty plan has the potential to be a smart investment—as long as you have some wiggle room in your monthly budget.

To explore an affordable home warranty option, Mr. Cooper customers can sign into their online account to check out American Home Shield’s exclusive pricing options.