Is a home warranty for you?

Posted by on September 12th, 2018

Spend any amount of time watching television, and you’re likely to encounter a barrage of advertisements for home warranties.

Well-written and engaging, the ads play on consumers’ well-founded fears of suddenly being faced with a major repair bill on an appliance or vital home system.

Right after purchasing a home, a nominal monthly fee in exchange for peace of mind can be very enticing. Maybe you even know someone who saved plenty when their home warranty covered multiple breakdowns.

Trouble is, home warranties often don’t deliver what’s expected.

These “service contracts” cost $350 to $500 in premiums a year, but unlike insurance policies, don’t cover losses from theft, or catastrophes like floods or fires.

The basic package usually covers breakdown of your plumbing, most kitchen appliances, water heater, heating and electrical components, sump pump and fans. Optional coverage is available for things like the washer and dryer, AC, garage door opener and septic system.

Beyond the premiums, there is generally a service fee added for each individual repair.

Before buying a home warranty, make sure to read the contract thoroughly. Often, there will be exceptions for items improperly installed, improperly maintained, or just too old.

Watch for oddities, as well. Some warranties cover the refrigerator but not the ice-maker or other gadgets. Others may cover your hot water heater but not the tank.

Consumer Reports has long recommended putting money into a savings account dedicated to product repair and replacement rather than betting on a home warranty. That way, the money is there whether something breaks or not.

This strategy depends a lot upon the age and condition of your appliances. You may also elect to have your major home systems inspected up front by a professional who can provide a maintenance schedule.

You can also buy new. Sometimes the manufacturer’s warranty provides better coverage, and there may be other protections if you buy the item with a credit card.

If you’re a recent home buyer, you may receive a “free” home warranty as part of the sales contract.

These are generally okay to accept, at least while they’re free. But remember, even if the premiums are paid, there will likely be a service fee added when the repair person actually shows up.