Are Home Warranties Worth the Cost?

March 20th, 2017 | Author:

[I]f you have bought a home recently, are in the process or plan to in the future, one of the options you may have is to purchase a home warranty. However, you will have to decide if having a warranty is worth the initial cost.

What is a Home Warranty?

A home warranty covers your home from major repairs, and you are only obligated for a service call. All covered systems are either repaired or replaced at minimal cost to you. Normal wear and tear is covered here, which is not part of most other homeowner’s insurance policies.

Is It Worth It?

For some, peace of mind knowing you won’t have a major out-of-pocket expense is worth the cost of the warranty. For others, it is simply a waste of money because you won’t use it. For example, if you move into a newly built home, the builder’s warranty will cover you for some time. If the home has mostly new appliances, they will be under the manufacturer’s warranty. In these instances, a home warranty is just paying double for the same thing.

On the other hand, if you live in an older home with older appliances and systems, a home warranty could save you a lot of money. You’re likely to need repairs or replacements at some point, and you won’t have to pay a lot for the job.

Since home warranties cover your major expenses like the furnace and air conditioning, as well as appliances, you could end up saving a lot of money. Even if you have to pay a portion of the cost, it will be less expensive than if you had to pay for the entire repair or replacement.

Having a warranty can help protect your credit because you won’t have to use a credit card to pay the expense and end up with a high balance to pay off. You also won’t be stuck making monthly payments for a repair, which could become difficult if you have financial issues.

A home warranty may make sense in the right situation. Just consider all aspects of purchasing one before you make the final decision.

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