Should You Buy a Home Warranty? My Honest Take

A past client recently asked me about a letter saying her home warranty was about to expire. She didn’t remember having one, and for good reason: she didn’t. The letter was an offer to buy a new plan, written to sound like something she already had was ending.

If you get a letter like that, check your closing paperwork before you call the number or send a payment.

What does a home warranty cover?

A home warranty is a service contract that may help pay for repairs to certain systems and appliances, such as HVAC, plumbing, electrical components, or a refrigerator.

What’s covered depends on the plan. You’ll typically pay for the plan and a service fee when someone comes out, and the contract may limit how much the company pays. The fine print matters more than the list of covered items on the brochure.

Here’s an example home warranty contract from a company some of my clients have used. I share it so you can see the kind of details to look for, not because I’m recommending that particular plan. Be sure to read the contract for the coverage you’re actually considering.

Why I usually prefer a repair fund

My personal preference is to set money aside for repairs. If something breaks, I can choose who does the work and how it’s handled.

Some of my clients have received a home warranty as part of their purchase. I tell them to keep their expectations realistic. It could help with a covered repair, but that doesn’t mean every part of the bill will be paid.

Before buying a plan, I’d ask:

• What will I pay for the plan and for each service call?

• What’s excluded, and is there a limit on what the company will pay?

• Can I choose the contractor?

• Do I already have coverage through a manufacturer’s warranty or another policy?

Those are the kinds of costs and coverage gaps the FTC guidelines on extended warranties recommend checking before buying a service contract.

What about water and sewer line protection?

That’s a separate decision. A plan for an outside water or sewer line is different from a home warranty for systems and appliances inside the house.

If you receive an offer for line protection, I’d call your homeowners insurance agent first. Ask whether you already have service line coverage, whether you could add it, and what it would cover. Then compare that with the offer you received. You might also ask neighbors whether they’ve had problems with their outside lines. And if your policy mentions sewer backup coverage, ask your agent to explain that separately; coverage for damage from a backup is a different question from paying to repair an outside line.

Is a plan worth it?

The question I’d start with is: If something broke, could I afford to fix it?

If the answer is no, a plan might offer some comfort, as long as you understand its limits. If you have money set aside and want to choose your own contractor, building an emergency repair savings fund may make more sense.

Either way, don’t let an urgent sounding letter make the decision for you. Verify what you already have, read the actual contract, and choose what works for your home and your budget.