Looking for peace of mind when you move into your new home?
A home warranty might be just what you need. These plans can offer financial protection against repairs and replacements to your home’s systems and appliances. But is it right for you?
Let’s look at how home warranties work and how much they cost, so you can make an informed decision.
How Does a Home Warranty Work?
If you have a home warranty, you can call the home warranty company directly when a covered appliance or home system breaks. They’ll send out an approved service provider and you pay a small deductible (in addition to the upfront cost to purchase the plan).
Without a home warranty, you must repair any appliances or home systems on your own – either through DIY efforts or hiring a service provider – and pay the full costs of any materials and labor.
But who pays for a home warranty, buyer or seller? It could be either. In most cases, homebuyers purchase a plan during the closing process, so they’re prepared for any repair issues. Sometimes home sellers offer a plan to entice buyers.
How Much Does a Home Warranty Cost?
Let’s talk about home warranty prices, so you can decide if it’s worth the investment.
The average cost of a basic coverage plan ranges from $350 to $600 a year, with deductibles from $50-100.
Your annual home warranty cost will depend on the:
- Coverage limits you choose (as you add more coverage, the price goes up)
- Size of your deductible (what you pay per repair)
- Length of your term (most plans are one year)
- Average cost of warranty plans in your region
- Selected home warranty provider
Are Home Warranties Worth it?
Let’s bring this to life with a real-world example. Imagine your water heater malfunctions just a few weeks after moving into your new home.
If you purchased a home warranty plan, you call the home warranty company. After confirming your coverage, they send an approved service provider. This person makes the repairs and you pay the deductible of (for example) $75. If you paid $400 for the plan, you’ve spent $475.
If you don’t have a home warranty plan, you’ll have to find a plumber to figure out what’s wrong. Let’s say you need a new gas control valve. You’ll need to buy a new one for about $400. Plus, an hour of labor will probably be about $150. That comes to $550.
Although these totals are similar, consider two important facts:
- You still have the home warranty coverage available for other issues around the house (for as long as your plan lasts).
- It could take a long time to find a reputable plumber and schedule them for a visit (and that’s tough when it comes to a water heater!)
So, is a home warranty worth it? It’s probably most beneficial if you’re not DIY-savvy and you’re looking at older homes. It can also be a lifesaver if you don’t have an emergency fund for home maintenance just yet.
Still not sure? Speak to a BHHS Fox & Roach real estate professional. As part of our advisory role, we always discuss whether a home warranty plan makes sense. We want you to be fully informed during the home buying process. If you decide to purchase a plan, we can also provide referrals to reliable home warranty providers.