A home warranty is a service contract that covers the cost of repairs or replacement of home appliances and systems such as plumbing, electrical, heating, and air conditioning. The question is, are home warranties worth it?

If you’re a homeowner, you know that unexpected home repairs can be a real financial burden, especially if you have older appliances or systems. A home warranty can help alleviate this burden by covering the cost of repairs or replacement of these items.

However, it’s important to do your research before purchasing a home warranty. Some warranties have limitations and exclusions, and may not cover all the items you need. It’s also important to read reviews and ratings of warranty companies to ensure you’re getting a reputable service. I’m going to cover both the pros and cons of home warranties, as well as an alternative that I think is just as good as getting one.

Are Home Warranties Worth It? Pros, Cons, and an Alternative to Home Warranties

How Home Warranties Work

Some of the top home warranty companies are American Home Shield, Choice Home Warranty, Select Home Warranty, First American Home Warranty, and Total Home Protection. If you compare these companies to each other, you’ll find the average cost per year is about $750. There are also additional coverages you can purchase that would increase the price, such as if you have additional HVAC systems in your house or a detached garage that has appliances inside.

If you find you need to make a claim for a repair, then you will be charged a flat service fee for one of their approved contractors to come to your home. The average cost of the service fee is about $100. Once you pay the service fee, that is usually all you have to pay as long as the item is covered under your warranty—it’s essentially a deductible.

Regarding the cost, many times, if you wait until your home warranty is up for renewal, you can get a better deal. For example, recently some friends only paid about $400 to renew through 2-10 home warranty even though it is advertised as being around $700/year.

The Pros of Home Warranties

Home warranties can be a really good option for those who are purchasing an older home. You might be unsure of the ages of the appliances, or you might know that many of the appliances are on their last legs. If it seems likely the refrigerator will give out in the coming year, then the cost of a home warranty and service fee may be less than the cost of a new refrigerator. The more appliances that are close to the end, the better of a deal a home warranty will be.

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