Should You Get a Home Warranty?

image of a bunch of wooden homes with one enclosed in a plastic bubble — (Image credit: Getty Images)

Appliance repairs are expensive. Fixing your washing machine may cost as much as $450, and replacing complex parts, such as refrigerator compressors, may run up to $1,250, according to home-services website Angi. A home warranty could offset those expenses, but it’s important to understand what it includes and whether purchasing one makes sense for you.

A home warranty is a service contract that covers the cost of repairing and replacing major appliances that have been damaged by wear and tear. Some contracts also cover your plumbing, electrical, and heating, ventilation and air conditioning (HVAC) systems. These costs aren’t typically covered by homeowners insurance, which pays for damage to your home’s structure or your personal property. Premiums vary, ranging from $25 to $150 a month, depending on the level of coverage, says Viktoriya Cully, director of underwriting, warranty and specialty risk at AmTrust Financial.

In addition to the premium, you can expect to pay what’s known as a trade service call fee, which is a fixed charge you incur every time you request a service call. This fee, which is similar to an insurance deductible, averages $75.

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Should you buy a home warranty?

A home warranty may be beneficial if the manufacturer’s warranties on most of your appliances have expired or you have older appliances that break down often, says Robert Washington, a real estate broker with Savvy Buyers Realty in St. Petersburg, Fla. However, if you have a newly built home or brand-new appliances that are still under the manufacturer’s warranty, a home warranty probably isn’t worthwhile. You should also consider whether you’re better off putting the money you would spend on premiums in an emergency fund, which would earn interest and be available for other expenses, too.

Because home warranty providers send service technicians to you, you won’t have to worry about finding someone to make repairs. That can be a drawback, however, if you’re not happy with your provider’s technicians. In addition, warranty companies often impose limits on the amount they will pay for repairs and replacements, so you may end up with a lower-quality appliance than you would buy on your own.

If you decide that purchasing a home warranty may be worthwhile, you can search for providers and check customer reviews on the websites of the Better Business Bureau, Angi, BestCompany and Trustpilot.

Most contracts require you to wait 30 days from the time you obtain the warranty before filing a claim. This measure is designed to prevent customers from filing a claim for a preexisting problem. When you file a claim, the warranty company will typically send a technician within two days to diagnose the problem. If it’s a minor issue, the technician will usually fix your appliance on the spot. If more work is required, you’ll have to schedule follow-up visits, and you’ll be charged a service fee for each one.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Ella Vincent is a personal finance writer who has written about credit, retirement, and employment issues. She has previously written for Motley Fool and Yahoo Finance. She enjoys going to concerts in her native Chicago and watching basketball.