Are Home Warranties Worth It?

Do you need a home warranty?

People tend to mistake home warranties and home insurance as the same type of coverage. However, this is wrong as insurance covers costs such as fires, property-related crimes, and even water-related issues that could damage the entire structure of the house. Home warranties are service contracts to cover repair or replacement costs for major housing components such as plumbing, HVAC, electrical systems, and appliances. 

Home warranties are usually purchased as part of a home sale. Sellers will sometimes cover this as part of the sale. Optionally, the buyer can purchase it as part of their home closing costs. 

If the seller is providing the warranty for you, it is a no brainer to purchase. If not though, you may be asking whether the added expense is worthwhile. Continue reading this article as we'll discuss home warranties in more detail, and if they are worth it or not.

Home Warranty Benefits

Home warranties are extremely beneficial for people who have are purchasing an older home that has older appliances. A warranty can give you peace of mind that you won’t be spending thousands of dollars to replace something months after you move in. 

Your home inspection pre-purchase is vital to understanding whether you might benefit from a warranty. The inspector should point out potential issues as well as the age of the appliance in question. Look closely at the age and condition of the furnace and air conditioner; the average cost of fixing either of these ranges from $4,000-5500 which would more than pay back the cost of the warranty. 

Ease of repair is another benefit. Most warranty companies now have online portals where you can easily fill out a claim form. They will assign the repair to a reputable contractor, and handle all of the billing for you. 

Drawbacks of home warranty

The biggest problem with home warranties is that it does not cover items that are not properly maintained. Some warranty companies are notorious for using this as a reason to deny claims for major repairs. It is critical to research your warranty company options ahead of time to ensure you have a fair reputable provider. 

Just like with insurance, you may be spending a lot of money on a warranty that is never used. If you have a newer home, it is probably better to put money into an emergency fund that you can access at any time. 

While you get the benefit of the warranty company managing repairs, you lose control over who manages the work. In theory, warranty companies are highly incentivized to pick very reliable contractors, you really don’t know until that person shows up to do the work. A warranty is definitely not for you if you want to have control over this process. 

Finally, you should not purchase a home warranty on a newly constructed home. The builder should provide a warranty for the construction work for at least one year, and your appliances will be covered by the manufacturer’s warranty.


We have covered the benefits and drawbacks of owning a home warranty. However, you should know that every warranty company has its own set of policies too. If you're planning on getting the warranty, then make sure to go through the top warranty companies of 2020 to make your choice easier.

The answer to whether or not they are worth the investment comes down to the age of the home and appliances as well as your preference for buying a policy that may not be used. I highly recommend using a home warranty purchase as part of the negotiation tactics with the seller.

Want to learn more about home buying? Check out 3 tips for buying your first home here!

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