Repair Roulette: Why Home Warranties Make Sense

I’m not a big fan of extended warranties. Whether it’s a new car, a big screen TV, or a major appliance, I’ve always been a little (OK, a lot) cynical about who actually benefits from this game of repair roulette. Warranty companies aren’t in business to lose money and, believe me, they don’t. Nine out of 10 times I’ll take a pass when it comes to the proverbial “rust-proof undercoating.” I’d just as soon sock the money away and spend as needed. When it comes to my home—cornball alert!—now that’s a “house” of a different color.

If you buy or sell a home, a home warranty will likely be part of the deal. In this market, the seller usually foots the bill, but like many things in a real estate transaction, that’s always a point of negotiation. The warranty usually lasts one year, and more often than not, homeowners don’t re-up. My sloppy research puts renewals at about 30 percent. If you want my advice, look at joining the minority. If you don’t have a home warranty, I think you should consider one.

Prickett’s Law of Homeowner-ing states: A lot of your pricey stuff has a tendency to break down when it’s around five years old. I could harp on the whys of this phenomena (cheap, cheap, cheap…), but the bottom line: There’s a fair chance that something’s going to die, and a home warranty is device life insurance. Whether it’s your water heater, air conditioner, garage door opener, or a kitchen appliance, repair or replacement is a seriouscash-ectomy. 

Just last week, a client’s A/C went DOA. Their home warranty covered the $1,100 cost.

Home warranties range in price and coverage. A decent policy, based on a 2,500-square-foot home, costs about $450 a year. You might need to pay around $50 for a mechanical inspection in order to qualify for coverage. The policy will not only save you the cost of a repair, but also the time and hassle of finding a contractor and scheduling the service call. 

Just like any other insurance, limitations and deductibles may apply. Most warranties cover the mechanical systems and major appliances, and are never a replacement for homeowner’s insurance or regular maintenance. You can’t use the same A/C filter for seven years and expect a free ride when the unit fries.

This leads us back to the fine print. If you’re thinking about buying a policy, you need to be absolutely clear what is and, more importantly, isn’t covered. Not all policies are alike. Understand what is expected of you when it comes to maintenance, and what deductibles and service call fees might apply. 

And in nearly all cases, you don’t get to pick the contractor who services your problem. Like most things in life, you get what you pay for, and if you have the illusion that the warranty fairy will pop in and make everything just right, you’ve got the wrong fairy.

In the long run, I feel that the average homeowner, especially a homeowner who is not all that handy, can benefit from a warranty, given the way homes are built these days. That said, it is not a magic pill. If you’re still on the fence, add up the cost of all the breakable things that are covered under the warranty, and divide that number by the cost of the policy. I guarantee it’s a better deal than rust proofing!

I’m not a big fan of extended warranties. Whether it’s a new car, a big screen TV, or a major appliance, I’ve always been a little (OK, a lot) cynical about who actually benefits from this game of repair roulette. Warranty companies aren’t in business to lose money and, believe me, they don’t. Nine out of 10 times I’ll take a pass when it comes to the proverbial “rust-proof undercoating.” I’d just as soon sock the money away and spend as needed. When it comes to my home—cornball alert!—now that’s a “house” of a different color.

If you buy or sell a home, a home warranty will likely be part of the deal. In this market, the seller usually foots the bill, but like many things in a real estate transaction, that’s always a point of negotiation. The warranty usually lasts one year, and more often than not, homeowners don’t re-up. My sloppy research puts renewals at about 30 percent. If you want my advice, look at joining the minority. If you don’t have a home warranty, I think you should consider one.

Prickett’s Law of Homeowner-ing states: A lot of your pricey stuff has a tendency to break down when it’s around five years old. I could harp on the whys of this phenomena (cheap, cheap, cheap…), but the bottom line: There’s a fair chance that something’s going to die, and a home warranty is device life insurance. Whether it’s your water heater, air conditioner, garage door opener, or a kitchen appliance, repair or replacement is a seriouscash-ectomy. 

Just last week, a client’s A/C went DOA. Their home warranty covered the $1,100 cost.

Home warranties range in price and coverage. A decent policy, based on a 2,500-square-foot home, costs about $450 a year. You might need to pay around $50 for a mechanical inspection in order to qualify for coverage. The policy will not only save you the cost of a repair, but also the time and hassle of finding a contractor and scheduling the service call. 

Just like any other insurance, limitations and deductibles may apply. Most warranties cover the mechanical systems and major appliances, and are never a replacement for homeowner’s insurance or regular maintenance. You can’t use the same A/C filter for seven years and expect a free ride when the unit fries.

This leads us back to the fine print. If you’re thinking about buying a policy, you need to be absolutely clear what is and, more importantly, isn’t covered. Not all policies are alike. Understand what is expected of you when it comes to maintenance, and what deductibles and service call fees might apply. 

And in nearly all cases, you don’t get to pick the contractor who services your problem. Like most things in life, you get what you pay for, and if you have the illusion that the warranty fairy will pop in and make everything just right, you’ve got the wrong fairy.

In the long run, I feel that the average homeowner, especially a homeowner who is not all that handy, can benefit from a warranty, given the way homes are built these days. That said, it is not a magic pill. If you’re still on the fence, add up the cost of all the breakable things that are covered under the warranty, and divide that number by the cost of the policy. I guarantee it’s a better deal than rust proofing!