Home repair insurance can be invaluable when it comes time to repair or replace appliances or home systems. But when is it worth using one? That’s a question that many homeowners ask themselves.
According to statistics, the usage of home warranty insurance is on the rise. The numbers speak for themselves. On average, homeowners tend to place two and a half claims per year. In the past four years, the home warranty market saw a compound annual growth rate (CAGR) of around 12% per year. Other trends such as the COVID-19 pandemic and working from home have also increased the popularity of home warranties.
In this article, we’ll explore when a home warranty makes sense and when it might not be the best option. We’ll also look at what a home warranty covers and how it differs from homeowners insurance.
What Is a Home Warranty?
A home warranty is an insurance policy that covers the repair or replacement of appliances and home systems. Also known as home repair insurance, a home warranty differs from both homeowners insurance and a manufacturer warranty. Homeowners insurance covers damage to your home caused by events like fires, storms, and theft. A manufacturer warranty, on the other hand, covers defects in quality or materials. A home warranty, by contrast, covers the repair or replacement of appliances and systems due to normal wear and tear.
Most home warranties are offered by third-party companies, though some builders include them as part of the sales contract when you purchase a new home. A typical home warranty costs between $300 and $500 per year and covers items like your air conditioner, furnace, plumbing, electrical system, and major appliances like your refrigerator and dishwasher. Some home warranties also cover things like your washer, dryer, oven, and microwave.
If a covered item breaks down, you simply call the home warranty company, and they will send a technician to your home to diagnose and repair the problem. If the item can’t be repaired, the home warranty company will replace it with a similar item.
There are a few things to keep in mind before you purchase a home warranty.
- First, home warranties typically have a deductible, which is the amount you’ll pay out of pocket for each repair or replacement. Deductibles range from $50 to $100.
- Second, home warranties usually have a service call fee that you’ll pay each time you request service. Service call fees range from $50 to $100.
- Third, home warranties typically have a limit on the amount they’ll pay for each repair or replacement. That limit is usually between $500 and $2000.
- Fourth, not all home warranty companies are created equal. Some have better reputations than others. Do your research before purchasing a home warranty to ensure you’re getting a good deal.
Now that we’ve answered the question, “what is a home warranty,” let’s take a look at when it makes sense to use one.
When It Makes Sense to Use a Home Warranty
There are several circumstances when it makes sense to use a home warranty. These include the following:
- If you live in an older home, a home warranty can save you money on repairs. Older homes often have outdated or malfunctioning appliances and systems. A home warranty can help you afford to replace them.
- If you’re buying a used home, a home warranty can give you peace of mind. Used homes may have hidden problems that won’t be apparent until after you move in. A home warranty can help you deal with those problems if they arise.
- If you’re selling your home, a home warranty can make it more attractive to buyers. Homebuyers are often wary of purchasing a home with outdated or malfunctioning appliances and systems. A home warranty can help ease their concerns and make your home more appealing.
- If you’re a first-time homeowner, a home warranty can again give you peace of mind. First-time homeowners often don’t know how to deal with appliance or system malfunctions. A home warranty can take the guesswork out of repairs and replacements.
If any of the above circumstances apply to you, a home warranty may be a good idea. However, there are also a couple of circumstances when a home warranty may not be needed. For example, if you live in a brand-new home, chances are your appliances and systems are still under the manufacturer’s warranty. In that case, it doesn’t make sense to pay for a home warranty because you’re already covered.
Another circumstance when a home warranty doesn’t make sense is if you plan to move soon. If you’re not going to be in your home for long, it’s unlikely that you’ll need to use the home warranty. In that case, it’s probably not worth the money.
If you’re unsure whether a home warranty is right for you, talk to your real estate agent. They can help you weigh the pros and cons of purchasing a home warranty.
Having a home warranty will give you peace of mind knowing that if something goes wrong with your appliances or home systems, you’re covered. So if you’re wondering, “when is it worth using a home warranty,” the answer is, it depends. Use a home warranty when it makes sense for you and your situation.
A home warranty can be a good idea in certain circumstances. However, it’s important to do your research before you purchase one. Make sure you understand what a home warranty is and what it covers. Also, be aware of the deductible, service call fee, and coverage limit. And finally, make sure you choose a reputable home warranty company.
Summer is here, which means it’s time to shop for an air conditioner, a ceiling fan, a fridge, or any other home appliance covered by a warranty. At First Premier Home Warranty, we offer customizable repair and service options for all sorts of household appliances and systems. If you have any questions about whether or not a home warranty is right for you, request a quote from us. We will be happy to help you make the best decision for your needs.