The Homebuying Process: Should You Buy a Home Warranty?

Last Updated on October 8, 2022

For many new homebuyers, the question of a home warranty will almost certainly come up. You might best consider them a necessary evil.

A home warranty can protect a homeowner from unexpected costs. A homeowner will always face unexpected costs and usually at the worst possible time.

If a major appliance fails, or your heating and cooling system crashes, you could have to foot the bill for repairs or replacements. That’s not even fun to think about, much less scrape together money to cover.

A home warranty provides you coverage for repair or replacement in such instances.

It sounds like a great option to get you off the hook, right? Well, there are some things you need to know before you sign up. As someone who purchased warranty coverage, here’s what I’ve found.

Home warranties don’t cover everything.

Just like everything else, you need to shop carefully. Warranty plans list the various things they’ll cover. Most have tiers of service, too. The more you pay, the more is covered.

Based on what I’ve seen, you can expect to pay between $500 and $1,000 per year for the typical home warranty. The one I selected comes with a price tag of about $650.

You can pay more to get more items and systems in your home covered. You can pay less if there are certain higher-ticket items you don’t need coverage for.

One little catch that’s probably obvious: your home warranty will cover regular wear and tear. If you go off and cause damage intentionally — or if it looks like you did — don’t expect the warranty company to cover your tantrum. (Nor should you.)

There’s generally one additional cost when something goes wrong: a service fee. The service provider who shows up at your door to diagnose and repair the problem will expect a fee. Your warranty plan will specify how much you’ll have to pay that provider directly when they cross your threshold. Typically, it’s anywhere from about $75 to $125 for that visit. That’s a one-time fee. If they have to come back within the covered period to follow-up, you won’t have to pay the service fee.

But be warned: Most warranty companies only cover their repairs for 30 days. So if you have to get them to send out the service provider on Day 31, you’ll pay another service fee.

The first answer will always be repair.

When something in your home goes south, don’t assume you’re getting a new one. It doesn’t work that way…at least, not right away. The warranty company will always start with the assumption that the 15-year-old stove or 10-year-old dishwasher — or whatever else is on the blink — can be repaired.

In some cases — again, check your plan’s terms before you buy — they may specify the number of times they’ll repair the same problem before they talk about replacing the system or appliance.

In my case, I have a refrigerator-freezer that stopped working back in December. A repairman came out and diagnosed the problem as a failed heating element. (Yes, freezers have heating elements…who knew?) He ordered a new one. They sent the wrong part. He ordered again and they sent the right one. He installed it. A couple of weeks ago, the freezer stopped freezing all over again.

I’ll admit it: I’m ready for a new one. I don’t trust this thing at this point. Twice now I’ve lost most of the contents of my freezer because everything thawed faster than I could cook it all. (And if I’d been able to cook it all, the refrigerator wasn’t cooling to a temperature cold enough to store it safely.)

But my warranty company said they will typically replace the same part up to three times before they “give up” and authorize a replacement. I’m clearly not as forgiving as they are.

Neither repair nor replacement happen quickly.

Here’s the real shocker: don’t expect same-day service. For that matter, same-week service might be a stretch unless you call first thing on a Monday.

Warranty companies don’t have an army of their own repair crews that they dispatch on a moment’s notice. Would that they did!

Instead, you need to know that warranty companies partner with both repair companies and independent contractors in communities nationwide. So, in my home base of Charleston, they have full-fledged appliance repair companies, plumbing companies, HVAC companies and one-man band-type repair professionals in their “network.”

When something goes wrong, you call your warranty company. The warranty company then “dispatches” one of the repair people for your situation. You then sit back and wait…for the service provider to call you. Different warranties have different policies: Most tell you that you should hear from the service provider within 48 hours to set up an appointment. They’ll come out, collect their service fee, diagnose the problem and research any replacement parts. Then they’ll have to set up another appointment to install the parts or make the necessary repairs.

Sometimes, the service provider is slow to respond. They have their own business and are working for clients beyond this one warranty company in most cases.

Once in a while — it’s happened both times I’ve had to reach out to my warranty company — the first person they connect you with doesn’t call. After two days, they’ll reassign your case to someone else. But then the timer restarts.

You’re free to call the service provider yourself, but if you’re paying a warranty company to connect you with responsible service providers, you shouldn’t have to. Still, given the low standards that qualify for “customer service” these days, expect to have to reach out yourself.

Let me say it again: Don’t expect fast service.

I submitted a service request for the aforementioned refrigerator/freezer a week-and-a-half ago. Days went by without a word from the first service provider. I called the warranty company multiple times after leaving a voicemail with the first one they assigned. (That first one, incidentally, was the same one who “repaired” it back in December.)

He didn’t call me back. The warranty company called him twice. They couldn’t get in touch, either.

They assigned me to a second company that seems much more responsible. Still, we were several days in by that point. The second company is an actual company, a family-owned company, in fact. They were able to get here in two days to diagnose the problem. They were then going to research the necessary parts.

Once that’s done, the service provider reaches out to the warranty company to get an authorization to buy the part and install it to complete the repair.

As I write this, it has been 12 days since I submitted the ticket. How’d you like going that long without a working refrigerator/freezer? The little I’m able to fit into a dorm-style fridge I bought for my cubicle at work is all I’m able to keep cool.

I don’t get to tell the service provider, “Hey, let’s just get a new one.” The service provider, likewise, doesn’t get to tell the warranty company, “Hey, let’s just get a new one.”

The service provider determines what it should cost to make the repair and the warranty company weighs that cost against the cost of replacement and makes a judgment call.

The warranty company will always choose the lowest cost of the two. Always.

‘Replacement’ may not cover replacing the item.

Here’s one more thing to pay close attention to when you shop around for a home warranty: covered replacement.

Your home warranty will cover replacement if an item can’t be repaired for what they consider a reasonable price. But when they tell you they’ll cover replacement, that isn’t necessarily true. They will give you an allowance to replace the item. They may also give you the option of them ordering a new one for you. (They’ll buy at a discount so they’re not paying full price.)

The refrigerator-freezer that came with my condo is one of those fancy vertical side-by-side jobs with the ice dispenser in the door. The ice dispenser never worked from the day I moved in, but I don’t need an ice dispenser; that’s why God made ice trays. The cost of replacing this type of refrigerator might run as high as $1,500 or more. If you are really into needless gadgets, you might want to upgrade to the kind that has the monitor in the door so you can look at pictures, watch movies or listen to music. (Why you’d want to watch a movie on a fridge is beyond me.) Those will set you back more than $2,000. Some models cost more than $3,000.

Your home warranty will likely give you anywhere from $500 to $1,500 to replace your unit. Some warranty companies set low coverage caps. Some set low coverage caps.

You’ll still likely have to pay out of pocket for at least part of the replacement cost. Saving something is better than nothing, of course. But keep in mind you’re paying for the home warranty itself, too.

Depending on the plan you select, you may have to pay a lot more of that share than you’d like. That’s why you need to shop around carefully.

Is a home warranty worth it? Probably so.

The bill I know I’ll face some day — sooner or later — is replacing an HVAC unit. Some of them can run thousands of dollars. To me, having a home warranty that can at least help with that is better than operating on blind faith that all will go well.

Sometimes what seems like a small issue can come with a big repair bill.

Every little bit helps.

But just understand that you’ll pay for the savings on repair and replacement in aggravation with delays. Nearly every warranty company, no matter how many five-star reviews it boasts, lists plenty of one and two-star reviews complaining of that very problem.

You’ll have to decide for yourself how much foolishness you’re willing to put up with.

For me, it’s a necessary evil. But I’m definitely shopping around for the home warranty that offers the most bang for my buck.

You should, too.