Buying a home is a thrilling milestone, especially in beautiful Utah. Whether you’re eyeing a charming older house in Salt Lake City or a new build in Lehi, the excitement is palpable. But alongside that excitement comes the reality of potential repairs and maintenance. Nothing dampens the joy of a new home faster than unexpected breakdowns. This is where the idea of a home warranty often comes into play, offering a safety net against costly repairs.

Before you rush to purchase a home warranty, it’s crucial to understand what you’re buying. Is it truly a financial lifesaver, or just another expense? In this blog post, we’ll break down the details of home warranties, comparing them to home insurance, and explore their true value. Let's dive in!

What Is a Home Warranty?

A home warranty, also known as a homeowners warranty, covers plumbing, electrical, and HVAC systems, as well as major appliances—usually for one year. You pay a set fee when you buy your home, and the warranty company agrees to help cover the costs to repair or replace things that break.

For new homeowners, this sounds like a good way to protect yourself from hefty repair bills. For instance, a broken HVAC system could set you back thousands of dollars, and we all know money can get tight after buying a house.

Home Warranty vs. Home Insurance

While a home warranty covers stuff that breaks, homeowners insurance covers your home (and its contents) if it’s damaged or destroyed by fire, windstorms, hail, or lightning. It also covers theft and vandalism.

Homeowners insurance usually covers much bigger losses that the average person can’t afford to fix. It’s also mandatory with most mortgages. And if your home is at risk of flood, earthquake, or hurricane damage, you’ll need separate insurance policies for those natural disasters.

What Does a Home Warranty Cover?

Home warranty coverage varies depending on the company and plan you choose. But most cover:

• Electrical systems
• HVAC systems
• Plumbing
• Major appliances (washers, dryers, refrigerators, dishwashers, stoves)
• Hot water heaters
• Sump pumps
• Garbage disposals

The more things you want covered (like a swimming pool pump or a TV), the more you’ll pay for your warranty. Remember, a home warranty only covers repairs after manufacturer’s warranties have expired.

How Does a Home Warranty Work?

Imagine a week after moving into your new house, your heat goes out. If you have a home warranty, here’s what happens:

1. You call the warranty company to report the problem and file a claim.
2. The warranty company sends a repair technician to your home.
3. The tech assesses the problem and informs the warranty company.
4. If it’s a repair your warranty covers, the warranty company pays some or all of the cost.
5. You pay a service fee, usually $75–$125, even if the repair isn’t covered by the warranty.

So, even with a home warranty, you’re not saying goodbye to repair bills entirely!

How Much Does a Home Warranty Cost?

A typical home warranty plan is about $1,050 a year, sometimes broken into monthly payments. Don’t forget the $75–$125 service fee for each repair call. Costs can vary based on your home and the coverage you choose. If you’re buying a new home, a builder’s warranty might be included, covering structural issues and system defects.

Extra Fees

Warranty companies usually set maximum repair costs for certain items. If a repair exceeds that amount, you pay the difference. For example, if your fridge dies and the warranty covers up to $800, but a new fridge costs $1,200, you cover the $400 difference.

Pros and Cons of a Home Warranty

Pros:

• Protection from unplanned expenses: A warranty can help cover costs when appliances and systems break down unexpectedly.
• Saves time and hassle: Filing a claim means the warranty company handles repairs, saving you from collecting contractor quotes.
  

Cons:

• Improper maintenance loophole: Companies can deny claims for “improper maintenance.”
• Repair over replace: Companies may insist on repairing rather than replacing old appliances.
• Limited coverage: Some big-ticket items may not be covered.
• Lack of choice: You have little say in repair timelines and contractors.
• Cost: Annual premiums and service fees add up, and if nothing breaks, it’s money wasted.

Is a Home Warranty Worth It?

In most cases, a home warranty isn’t worth it. You’ll likely spend more on the warranty than on out-of-pocket repairs. Most home repairs cost less than $500. You’d need to be very unlucky to have multiple major breakdowns in one year.

Instead of a home warranty, keep the money you’d spend on premiums and fees in your pocket. Save it for repairs and have control over the process and choices.

Home Warranty Alternatives

Don’t worry! Not having a home warranty isn’t the end of the world. Here are smarter alternatives:

• Build an emergency fund: Save 3–6 months of expenses before buying a house, and add extra for potential repairs.
• Check existing warranties: Newer appliances might still have manufacturer warranties.
• Regular maintenance: Service major systems like HVAC and water heaters regularly to extend their life.
• Plan for replacements: Budget for replacing old appliances based on their expected lifespan.

Conclusion

In conclusion, home warranties might sound appealing, but they often don’t provide the value they promise. Save your money, build an In conclusion, while home warranties might sound like a safety net for new homeowners, they often fall short of delivering real value. The costs associated with premiums and service fees can add up quickly, often exceeding the price of common repairs. Additionally, the limitations and exclusions in coverage can leave homeowners paying out-of-pocket for many issues. Rather than providing peace of mind, a home warranty can sometimes lead to frustration and unexpected expenses.

Instead of investing in a home warranty, consider building a robust emergency fund and regularly maintaining your home’s major systems. This proactive approach not only saves money but also gives you complete control over the quality and timing of repairs. By planning ahead and saving wisely, you can handle home repairs on your terms, ensuring that your home remains a safe and comfortable haven for you and your family. Remember, homeownership comes with its share of challenges, but with the right financial strategy, you can navigate them confidently and efficiently.