The Best Way to Evaluate Your Home Warranty

by | Feb 13, 2024 | Finance

When buying a new home, a home warranty can provide peace of mind against unexpected repairs and breakdowns of home systems and appliances. But, not all home warranty companies and policies are created equal. Here’s help on picking the best home warranty for your situation.

Look at the Fine Print

When shopping around and considering the cost of buying a home warranty, the first step is reading the fine print on exactly what a prospective home warranty does and does not cover. Pay attention to dollar limits per claim and per year. Also, look at what systems and appliances are excluded – some companies may not cover certain items like well pumps, septic tanks, or HVAC components. Know the service fees you would pay per repair visit. Understanding the exclusions prevents surprise costs later.

Research the Company

Next, research the reputation and reliability of the home warranty company itself. Are customers satisfied with the ease of using their policies and getting issues addressed? Do claims get denied frequently over fine print technicalities? Are contractors paid properly so quality ones will work with the company? Check online reviews on sites like Trustpilot and the Better Business Bureau to see actual customer experiences. Look for companies with an A or A+ BBB rating and numerous positive reviews praising customer service. Avoid brands with a significant number of complaints around claim denials or difficulty getting repair technicians scheduled. High marks for paying contractors means providers want to take jobs from that home warranty company. Stick with larger national brands that pay claims consistently per the policy terms.

Consider Your Home’s Condition

Factor your home’s age and equipment into the decision too. For newer homes with modern systems, a basic policy may suffice. Older homes with aging water heaters, furnaces, and the like would benefit from more robust coverage options in a premier plan. Know what equipment is nearing the end of its lifespan when choosing coverage. For example, if your AC unit or water heater is over 10 years old, opting for enhanced coverage on those items would be smart. Things tend to break down more often as they reach the end of usefulness. Customize based on the age and condition of appliances, roof, plumbing, and other home components to get the right level of protection.

Crunch the Numbers

Finally, weigh the cost versus projected savings by having a home warranty. On average, plans are going to come in under $1000/year. If you have two or more covered repairs annually, the peace of mind and reduced bills make it worthwhile. Think through what systems might need service based on age – if the water heater, appliances, or HVAC unit are aging, repairs are more likely. Also, factor in the age of your roof, whether you have a pool or spa equipment that could break, and if your area faces risks like termite damage. If multiple issues are possible, the warranty saves you money. If everything is fairly new, consider dropping the policy after the first year when fewer unexpected costs pop up. Run the numbers on possible repairs versus premiums to see if continued coverage makes financial sense.

As far as cost, basic home warranty plans start around $300 to $600 per year normally. They go up to $500 or more for enhanced coverage options. Higher square footage homes generally have higher policy costs. Shop around for promotions, too – some companies offer discounts for new home buyers or multi-year terms. While not the cheapest insurance, home warranties provide security, knowing you’re protected from surprise home repair bills.

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