Should You Buy a Home Warranty?

“I’m buying a house. Should I buy a home warranty?” It seems like a relatively tame question, right?

However, post it on Facebook or Nextdoor and watch the impassioned responses roll in. In fact, you might as well ask, “What political party should I belong to?”

Since everyone has their own experience, expect to hear a few people call them “a scam” or at the very least a waste of money. On the other hand, others will regale you with their tale of how having a warranty saved them from a freezing winter because they couldn’t afford to fix their furnace without it.

In the end, the decision is personal and based on how comfortable you are paying out of pocket. Especially if one of the more expensive items in your home, like the furnace or hot water heater, needs to be replaced. Here are some things to consider when making your decision.

Know the cost.

Firstly, know the cost. You can typically break down the annual cost into more manageable monthly payments, but the cost of the warranty itself isn’t the only thing you’re responsible for paying. Most home warranties include either a service call fee or a deductible, so it’s important to consider those factors in addition to the home warranty plan itself.

Consider your peace of mind

Secondly, consider your peace of mind. Many homeowners opt for a home warranty for major “just-in-case” scenarios. Just in case the air conditioning unit crashes and burns. Just in case the hot water heater dies. With the cost of some of these items running into the thousands—the average cost for a new air conditioning unit and installation, per HomeAdvisor, is $5,413!—the peace of mind factor is huge.

As stated by Investopedia, “For a homeowner who doesn’t have an emergency fund, or who wants to protect their emergency fund, a home warranty can act as a buffer.” Home warranties also make sense for people who aren’t handy or don’t want to deal with finding a contractor.

Understand that not everything is covered.

Lastly, understand that not everything is covered. There’s always a chance that the item you need to be repaired is not covered under your warranty. For one reason or another, some problems simply won’t be covered by a warranty. As a result, most home warranties won’t cover components that haven’t been maintained. The key lesson here is: Read the fine print, so you’re prepared.”