Buying a home is one of the largest financial commitments most people ever make. With the median price of a home in the U.S. now topping $361,000, according to Zillow, protecting that investment becomes a natural next step. But in the search for protection, some homeowners are tempted by TV commercials and online ads promising worry-free living through home warranties. These plans are marketed as safety nets, covering unexpected repairs to appliances and systems that homeowners insurance does not. But are they worth it?
Despite the name, a home warranty isn't an insurance policy. It's a service contract that promises to pay for the repair or replacement of covered items—such as HVAC systems, dishwashers, or plumbing—if they break down under normal use. That sounds reassuring, especially if your budget is tight and your appliances are aging. But before signing on the dotted line, you should take a closer look at what these contracts actually deliver and where they might fall short.
First, consider what you already have. Many appliances in newer homes are still covered under the manufacturer's warranty, and if you bought a device with a credit card, that card may automatically extend the original coverage. For example, several Chase cards offer an extra 12 months of protection beyond what the manufacturer provides. If you already have some of this coverage in place, you might not need a separate plan at all.
Cost is another major consideration. Prices vary widely depending on your location and the level of coverage you choose. Some plans cover just your appliances, while others extend to plumbing and electrical systems. A homeowner in Ohio might pay around $600 a year for a basic plan, while someone in Westchester County, New York could pay $1,200 for more comprehensive coverage. And that's before additional service fees—yes, most home warranties still charge you a fee each time a contractor comes out for a repair, even if the issue is covered.
Then there's the question of what is actually included. Many complaints about home warranties stem from confusion over what's covered. You may think your refrigerator is protected, only to find out the icemaker isn't. Or your oven might be excluded from coverage if it breaks while in self-cleaning mode or is damaged by a power surge. Even something as seemingly minor as poor installation or skipped maintenance could void your claim.
This is why experts stress the importance of reading the fine print. Melanie McGovern from the Better Business Bureau warns that many consumers are caught off guard when repairs are denied or the quality of service is underwhelming. She advises homeowners to ask every question they can think of before buying—and to expect real answers. A company with strong customer service can make a big difference if you ever have to file a claim.
Another catch is how repairs and replacements are handled. If your appliance fails completely, the company might offer to replace it—but not necessarily with something equal in value. In many cases, they only pay the depreciated value of the item, leaving you to make up the rest if you want a similar replacement. And even then, payouts are often capped. One provider, America's 1st Choice Home Club, limits coverage to $3,000 per item per membership term, which may not go far if you're replacing a major system.
Given these limitations, some experts suggest skipping home warranties altogether. Instead, consider building your own financial safety net. Consumer Reports recommends setting aside money in a dedicated savings account for home repairs and replacements. That way, you can control how and when that money is used without navigating red tape or service limitations.
Home warranties are not inherently bad, but they're not one-size-fits-all solutions. If you're buying a brand-new home, your builder's warranty and manufacturer coverage will likely provide more than enough protection in the first few years. However, if you're moving into an older home with aging appliances, a home warranty might offer some value—as long as you understand what it covers and what it does not.
Ultimately, a home warranty might provide peace of mind, but it will not remove the responsibilities of homeownership. Before you commit, take time to ask questions, read the fine print, and decide whether it's better to trust a third party—or yourself—with your home's most important systems.
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