How Cost-Effective Are Home Warranties?

(Photo : Sieuwert Otterloo via Unsplash)

According to recent figures from the real estate and financial sectors, an estimated 80 million people in the United States own the homes they live in. Millions more own rental properties. Per legal requirements, those property owners have insurance coverage to protect them in the event of fires, storm damage, and other disasters.

Homeowners policies may cover repairs, replacement of personal belongings, and other expenses following unfortunate events, but they're not all-inclusive. There are numerous issues homeowners insurance doesn't cover. For those, a home warranty could help bridge the gap to an extent. 

What Are Home Warranties?

Home warranties like those available from 2-10 Home Buyers Warranty act as safety nets. They cover the costs of repairing or replacing various systems and appliances in a home that aren't covered by homeowners insurance. When it comes to appliances, HVAC units, and other household components, they may also pick up where manufacturers' warranties leave off. 

How Much Do Home Warranties Cost?

Different types of home warranties are available. Most cover things like electrical systems, plumbing, and HVAC systems. They also tend to cover appliances such as stoves, refrigerators, dishwashers, garbage disposals, and the like. Some extend to additional appliances and structural components. As is the case with homeowners insurance, extra coverage can be purchased to pay for additional matters. 

Coverage costs vary by warranty, provider, and other factors. In general, though, they range from around $30 per month or $360 per year to $60 a month or $720 a year. Those are average costs for basic warranties. Homeowners with home warranties in place may also have to pay fees for services calls. Those range from about $50 to $125 per call on average, but the warranty typically covers the costs of repairs and replacements of damaged or malfunctioning appliances or systems. Additional costs may also apply based on the type of coverage in question. 

Are Home Warranties Worth the Cost?

Experts' answers to this question vary. Of course, many homeowners might say that those who don't feel warranties are worth their price have never been forced to pay for repairs and replacements out of pocket. Consider this: even on the highest end of the price spectrum, you're looking at just over $700 for a year's worth of coverage and a possible $125 for a service call. 

Now, take a look at the other side of the story. Say your furnace goes out in spite of your dedication to routine maintenance, and it's beyond repair. Some of the least expensive models on the market cost more than $1,500 without the cost of installation factored into the equation. Most furnaces cost even more. That's a lot to pay out of pocket.

What if your stove suddenly stops working? Even minor repairs could cost $200 or so. If it needs to be replaced, a low-end model could cost around $500, and the price of a new stove only goes up from there. Think about how quickly the costs could add up if more than one problem arose over the course of a year. A warranty would cover the expenses we've mentioned here and many others. 

Weighing the Benefits of a Home Warranty

As is the case with vehicle and homeowners' insurance, you could pay monthly or annual premiums for a home warranty and never need to use it. What if a major repair expense arose without the safety net of a home warranty, though? Imagine if numerous problems cropped up within just a few months. You could be looking at thousands of dollars of out-of-pocket costs versus the few hundred dollars you'd pay each year for a warranty. In most cases, it's better to be safe than sorry.