Do You Need a Home Warranty? How to Decide

Home warranties help pay for repairs to certain appliances and systems such as air conditioners. They usually come with monthly premiums and service fees, but home warranties never guarantee coverage, which means you could still end up paying out of pocket for repairs.

However, some homeowners might find a home warranty helpful, especially if they’re worried about paying for anticipated repairs.

When a home warranty makes sense

You think your systems or appliances might stop working

If you think your appliances, air conditioning or heating system might break down in the next year, a home warranty might be worth considering if the repair or replacement costs more than the home warranty.

How it can save you money: Let’s say you’re worried about your dishwasher, which could cost about $350 to repair, and your microwave, which can run around $200 to repair

When it doesn’t make sense: If you’re only concerned about paying for less-costly repairs, for example a broken microwave, a home warranty might not save you money. Keeping with the example, a year of coverage for $340 would cost you more than the $200 repair.

You can’t cover the full cost of a repair or replacement

How it can save you money: If saving enough money for a repair is beyond your budget, but paying a monthly premium for coverage is doable, a home warranty has the benefit of letting you pay less every month instead of more all at once.

When it doesn’t make sense: If you’re able to save enough to repair or replace a system or appliance, it could cost you more money to pay for a home warranty if the plan doesn’t cover your claim. In this case, you’d have to pay out of pocket for the repair plus pay the monthly premiums.

When to skip a home warranty

Your systems and appliances are relatively new and unlikely to malfunction

Having items that are well within their lifespan and show no signs of wear and tear might mean it’s better to hold off on a home warranty

What to do instead of buying a home warranty: Start a maintenance fund for future repairs. Put the money you would’ve spent on a home warranty in a savings account. Set it up as an automatic deposit and it’ll feel the same as if you were paying a monthly premium for a home warranty.

Your appliances and systems are still under manufacturer warranty

Most manufacturer warranties are good for 12 months after purchase, and many home warranty companies won’t pay for repairs or replacements as long as items are under warranty by another third party

What to do instead of buying a home warranty: Register your appliances and systems with the manufacturer to ensure it will repair them if they malfunction.

Your items are more than 10 years old and you don’t have records to prove they’ve been maintained properly

Most home warranty providers require that you regularly maintain your systems and appliances, and some can request years of maintenance records before approving a claim

What to do instead of buying a home warranty: Research how to extend the life of your appliances and systems. For example, you can have an air conditioning company perform seasonal tune-ups to keep your HVAC system running longer

You can save money to cover potential repairs or replacements

The simplest alternative to a home warranty is setting money aside for repairs. That way, you’ll have the money when you need it. If you’re able to do this, you could skip a home warranty.

Are you able to save for repairs? Even if you can afford to save to repair or replace your items, a home warranty might still be a smart move if you believe the company will approve your claims, and if fixing it yourself would cost more than the home warranty.

What to do instead of buying a home warranty: Put money into a savings account that is only for appliances and home systems, and save a bit more than you think you’ll need if you can. Make it so that the fund is obviously for repairs only — consider naming the account something like “Home Maintenance.”

How to know if a home warranty is right for you

The math makes sense

When looking at the cost of a home warranty, play out a few scenarios to see if you’ll save or lose money. For example, if you’re worried about your HVAC system breaking down, research the average cost of repairing your type of system and compare that with the cost of a year of home warranty coverage. Be sure to add in other fees you would pay, such as service fees.

A backup plan for repairs makes you feel better

Even if you can afford to pay for repairs out of pocket, sometimes having a backup plan can give you peace of mind. If that’s the case, look at home warranty plans that have good coverage for the appliances or systems that worry you the most.

Most of the repairs you’ll need will meet your plan’s coverage

Home warranty companies don’t approve every claim. They may exclude an item or part if the item malfunctioned due to a lack of maintenance. But if you think the home warranty provider will approve the repairs and the reason for the repairs, a home warranty might be right for you.