3 Reasons Home Warranties Might Not Be Worth It

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Don’t end up wasting money on a warranty that doesn’t offer the expected protection.


Key points

  • Some homeowners consider purchasing a warranty to protect their investment.
  • These warranties can sometimes be costly.
  • The coverage they provide may not be as comprehensive as expected.

Homeownership comes with many expenses beyond your mortgage payment. If something goes wrong with the property, you will be responsible for paying for it – not your landlord. For fear of repair costs, some owners want to buy a warranty.

Home warranties should not be confused with warranties provided by builders when buying a new home, nor with home insurance. They usually provide coverage, offered by a third-party warranty provider, which is supposed to cover most major home systems.

Unfortunately, they are often not worth the money you pay for them. Here are three big reasons why.

1. You may already have coverage without paying for it

Often many items in a home are covered by a manufacturer’s warranty, especially the more expensive items.

For example, household appliances usually come with a warranty of at least one year. And if you pay for them with a credit card, you may be able to get longer protection if your card offers an extended warranty. HVAC components, like a furnace, may even come with a multi-year warranty.

If you have a newer home and you already have a manufacturer’s warranty on most big-ticket items in your home, paying for additional coverage from a third-party provider wouldn’t make sense.

2. You may face high service or diagnostic fees

Many home warranty companies charge you a fee of $50 or more just to come and check to see if you have a covered issue. These charges may be due even if the warranty does not cover the problem.

At the time you pay this service fee, you could end up with higher disbursements than you would have paid to an independent repairer. Or you could be out of cash if it turns out you have no coverage and need to call a repairman anyway.

3. Coverage may not be as complete as it looks

Residential warranties also usually come with many limitations. For example, there may be exclusions for entire parts of your home, such as pool equipment or the garage. Or they may exclude certain common issues that arise or may not cover specific components of covered systems, such as the water heater Tank even if the water heater is theoretically covered.

Warranties may also promise “replacement” coverage if an item included in the warranty cannot be repaired. But you usually won’t get the full amount of money needed to replace what’s broken. Instead, you would be paid the depreciated value of the item. The amount the warranty provider pays you for a 10-year-old water heater may not amount to next to nothing.

If you’re still considering a home warranty despite these drawbacks, you need to make sure you read the details carefully so you don’t end up spending a lot of money on a policy that doesn’t provide any protection. you were counting on.

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