Is a Home Warranty Right for You?

It makes sense to consider a home warranty. After all, your home is likely the biggest investment you're making right now. If you'd consider buying a warranty for an appliance you bought from a store, it seems logical to buy one for your home. However, many people have had major problems with their home warranties, or found out that they weren’t worth the money they invested in them, so it pays to do your homework before signing on the dotted line.

Not all home warranties are created equal. Some will work out better than others for your particular situation. In addition to that, the effectiveness of a home warranty may ultimately just come down to what goes wrong in your house that requires you to use the warranty.

The key is to know and understand as much as possible beforehand about a home warranty you're considering buying. It's going to cost you hundreds of dollars a year (on top of service fees associated with claims), so it's important to know what it covers and how much it will actually cost for a repair. You don't want to purchase the warranty, have something go wrong, and expect to be covered, only to find out that the problem you're experiencing was excluded in the fine print.

You also need to make sure you know who will be handling the work when the time comes to have something fixed. Most home warranty companies have contracts with local companies to which they assign all repair orders. Ask which companies will be used by the warranty provider. Then, do some research on them to make sure you’re comfortable with leaving your repairs in their hands and confident that they'll do the job right without giving you problems.  

Despite potential issues, home warranties certainly do many homeowners a lot of good. When they work out, they can save you substantial repair costs for appliances and systems. They can also save you the hassle of finding reliable contractors or repair technicians yourself.

Warranties are especially good to have if you purchase a previously lived-in home complete with appliances and systems, such as air conditioning units, water heaters, and furnaces, that have been used for several years. Such items do face wear and tear, so there is a very good chance you will need repairs, leaving you to foot the bill.

Some warranty companies exclude appliances like refrigerators and washing machines, but offer coverage for them at an additional cost. You may not need this add-on coverage if you have new appliances, but it may be worth the additional premium if your appliances have been well-used for many years.

It’s also very possible that while these things might be covered by a home warranty, that very same document may exclude certain components of said appliances and/or systems, giving you a false sense of security. Examine the fine print and look specifically for exclusions to avoid being burnt.

Before you buy a home warranty, always read the contract and fully understand exactly what it does and does not cover. Shop around for one with understandable and trustworthy language. Don't be afraid to ask specific questions until you get straight answers. This could ultimately save you from buying a warranty that doesn't give you the protection you need or even the protection you believe you're getting.

Investigate before buying. Home warranties are often the subject of complaints online on sites like the Better Business Bureau, Angie's List, etc. If you buy a home warranty, understand how to cancel it (if this is an option) if you change your mind.

Other good things to know about your home warranty are: how long the policy covers your home, whether a money-back guarantee is offered, what happens to the policy if you sell your home, and if there is a deductible.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.