For homeowners on a tight budget, a home warranty can offer peace of mind. A good policy limits unexpected expenses where your home’s crucial systems are concerned. Buying a home warranty could save you from having to tap your emergency fund to cover a broken freezer or malfunctioning air conditioning unit.
Benefits of a home warranty
With most home warranties, when an appliance or system in the home breaks down, the homeowner simply calls the warranty company. There’s no stress about which repair company to contact. While the homeowner is responsible for the deductible, getting someone to diagnose the problem can be easier if you have a home warranty.
New homeowners may want a home warranty to help them cover unexpected expenses. There are many costs associated with buying a home. If money is tight, this type of warranty can offer help when you need it most.
What to know before you buy a home warranty:
You may not need a home warranty
- Many new homes are already covered under some type of home warranty built into the purchase price.
- If you paid for an appliance with a credit card, you may already have coverage. For example, American Express doubles the manufacturer’s warranty automatically.
The cost of the warranty and the co-payment
You’ll pay a premium for the warranty, but if you use it there will also be a co-pay. You may have to pay the service technician directly for his home visit, which could cost between $65 and $125.
Your fix-or-replace options
If you’ve fixed your refrigerator a few times, you may be ready for a new one. The home warranty company may disagree, however. If they agree to help you replace an appliance, they may only give you the depreciated value, not the replacement value. This means you would pay the bulk of the cost of replacing a broken appliance.
You may also run into problems trying to replace a Frigidaire refrigerator with an LG model or a Whirlpool dishwasher with a Maytag. Some warranty companies only replace the exact model, or the closest equivalent, from the same manufacturer.
Read the fine print
Most of the complaints to the BBB about home warranties are due to a misunderstanding about what is covered and what is not. For this reason, it’s crucial to become familiar with your home warranty rules. Here are some examples from various home warranties:
- The refrigerator is covered but the ice maker is not
- The broken oven isn’t covered because it stopped working while it was in clean mode
- The built-in high-end microwave isn’t covered because it was damaged by a power surge
- The water heater is covered, but not the water tank
- The dishwasher is leaking, but the repair isn’t covered because it was installed incorrectly
Before spending hundreds of dollars on a home warranty, consider self-insuring by putting the cost of the home warranty into your emergency fund every year. If you decide to get a home warranty, having the deductible set aside will allow you to call for professional help when one of your appliances malfunctions or stops working without worrying about the impact to your normal budget.
When it comes to making a decision about a home warranty, it’s important to research the companies you consider. Choose a company with good ratings and reviews. Compare plan restrictions and deductibles side-by-side to help you choose the home warranty that will best meet your needs.
If you find yourself in a situation where you aren’t covered by a home warranty to replace an appliance and don’t have an emergency fund, a personal installment loan may help. Installment loans allow you to pay back your loan over a set time with equal payments. This way you can spread out the cost of replacing an expensive appliance with easy to make payments which are designed to fit into your budget.