Are Home Warranties A Scam?

Every homeowner is faced with a broken appliance or malfunctioning home system at some point. The sun rises, the wind blows, and houses will need repairs. If you’re constructing a home or buying a newly built one, your builder is likely to offer you options for a warranty to help with the cost of repairs to your home. The question you’ll probably looking to answer is, “are these warranties worth it?”

What do Warranties Cover?

Home warranties typically come as a period of 1 year, 2 years or up to 10 years. 1-year warranties typically cover the repair or replacement of appliances and systems like water heaters, laundry machines, HVAC, plumbing and electrical. 2–10-year warranties are usually for serious structural concerns, like load-bearing walls and foundational issues.

These warranties can come from a few different places, but typically, when you’re constructing a new house, your builder will be the one offering them. They sometimes have a coverage limit; for example, if you have a repair that costs $3,000 but your warranty only covers $2,000 worth of repairs, you’ll have to pay the remainder out of pocket.

The builder may also outsource the warranty to a third party depending on what part of the house needs to be repaired. For example, if a third-party roofing company installs the roof of your home, they’re the ones who will handle issues with the roof, not the builder. Knowing what companies are responsible for building the different parts of the home will help reduce stress when the time comes to contact them regarding issues with the home.

What Do Home Warranties Cost?

Home warranties are typically paid monthly, like rent and utility costs. The number of systems and appliances and the size of the home and property are the primary factors in determining the cost of a home warranty. The costs vary, but on average land somewhere between $450 and $850 a year.

The cost of a home warranty also depends on what kind of warranty you have. A 1-year warranty will naturally cost less than a 2-year warranty, and so on. Some companies will also charge an annual fee, and there will typically be a service charge as well when service is required. It’s worth looking at the company’s reviews before signing up for a warranty to see if it’s right for you.

Is a Warranty Worth it?

So, now that you know what the warranties cover and how much they cost, you’re probably thinking, “is this worth it, or is it a scam?” That question doesn’t have a simple yes or no answer; it’s a topic you’ll want to be informed about before you decide it a warranty is necessary. It’s important to know the difference between home warranties and homeowner’s insurance as well; check out our article about insurance to see the differences in coverage between the two.

Warranties are not necessities; they’re just a way for a homeowner to secure some additional financial coverage if an issue with the home should arise. That means the value of a warranty is contingent on the financial security of the homeowner. If someone has higher income, they may not see the need for a warranty because they can pay for the repairs with little issue. Conversely, someone with a lower income might find more value in a warranty because they’ll have the financial safety net it can provide if a serious problem with the home occurs.

Ultimately, it’s up to you whether you believe a home warranty is worth the cost or if it’s a scam. There are certainly benefits to having one, but you’ll have to weigh the cost against how often you believe the warranty will come into play. To learn more about home warranties and other home-related topics, check out NewHomeSource.com.