The pros and cons of extending your home warranty
Purchasing a home warranty plan is pretty much the same as purchasing insurance. They have their differences, of course, but they are essentially the same. The most popular home warranty companies offer great deals to homeowners as well, providing their clients with peace of mind and considerable convenience. Similar to insurance, home warranty plans usually run for a year. This means that homeowners need to extend the home warranty plan after it runs out. But is extending the home warranty in your best interest? The answer to that question is not as simple as yes or no. That is why this article will cover some questions you may want to ask yourself, as well as the pros and cons of extending your home warranty.
A few questions you might ask yourself before extending your home warranty
Before you make the decision to extend your home warranty, you might want to ask yourself the following questions:
- Is the home warranty worth it for me?
- Should I extend the warranty even if I did not use it yet?
- Do I renew my home warranty before it expires?
- How much do home warranties cost?
Most of the time, people who are considering extending their home warranty plan are the ones that received it alongside the purchase of their new home. Of course, even if you’ve purchased a plan on your own, there is still merit in thinking about whether you should extend it. To put it simply, there are many benefits of home warranty plans but they are not for everyone. This is precisely the reason you need to ask yourself the following question:
Is the home warranty worth it for me?
Every home and homeowner is different. A home warranty plan might be extremely important to some while being more of a nuisance to others. For example, if you are the type of person who likes to get their own contractors, a home warranty plan is not for you. Home warranty companies have their own contractors, meaning that you don’t get much of a choice of who gets to repair/replace your appliances. Furthermore, the costs associated with a home warranty are not to be ignored. If your home is brand new, for example, you might get less “mileage” from a home warranty plan than if it was a few decades old.
Also, there is another big caveat when it comes to home warranties: Maintenance. Every home warranty plan requires you to perform routine maintenance on your appliances. This means that you need to take your spring home maintenance checklist quite seriously or you might find yourself without any coverage. Therefore, before you think about extending your home warranty, you may want to consider how much maintenance work you are putting in throughout the year. If you are not doing any maintenance, chances are that you might not want to extend the warranty. But if you are diligent on your maintenance tasks, a home warranty might be ideal for you.
Should I extend the warranty even if I did not use it yet?
As with insurance, there is always a chance that nothing will break for the duration of the warranty. While this is a great thing in and of itself, it also means that you are not getting any value out of your home warranty plan. Aside from the peace of mind that it offers, of course. To be honest, peace of mind is one of the most important reasons why you need a home warranty plan in the first place but it does not provide any monetary value, per se. But the fact of the matter is that you can expect most of your appliances to break down at some point, that is a simple inevitability. Just because you managed a year without any repairs does not mean that the next year is going to be the same.
But if you are quite certain that all your appliances are in good condition and that you are taking good care of them, you might want to consider not extending the home warranty plan. Even if something was to break down, you can always pay for the repairs out of your own pocket.
Do I renew my home warranty before it expires?
If you know that you are going to renew your home warranty, then yes, you should definitely want to renew it before it expires. However, due to the heavy competition between home warranty companies, you might want to “shop around”, even if you are satisfied with your current provider. Most of the companies that sell home warranties offer much better deals for new clients than for their regular clients. It may sound like a paradox but that is the truth of it. Actually, this is a common thing in most industries. Just look at the internet providers and their deals for new customers and you will get the picture.
How much do home warranties cost?
Another thing to consider is the actual cost of a home warranty plan. Of course, the more things you want to be covered, the higher the cost. But in a nutshell, most monthly premiums go between $40 and $60. And that is just how much you are paying for the home warranty itself, without any service fees. On average, you can expect them to be anywhere between $60 and $125 per service request.
Pros and cons of extending your home warranty
- You continue to have peace of mind
- You will most likely save money in the long run
- Home warranties can be extremely convenient
Peace of mind
As mentioned previously, the largest benefit of having a home warranty plan is the peace of mind that it provides. You know that, no matter what, you will not be facing a repair/replacement cost that you simply cannot afford. By extending your home warranty, you get to continue having that peace of mind.
Extending your home warranty may save you money in the long run
Depending on your situation, a home warranty plan might save you a lot of money. The older your home and its appliances are, the greater the chance that you will see great value from your home warranty coverage. On average, a homeowner with a home warranty places around two to three claims per year. Considering that some repairs can cost thousands of dollars, it is easy to see how you can benefit from a home warranty plan. However, to make the most out of your home warranty, you need to make sure that you know the specifics of home warranty coverage, as well as exclusions (more on that in the cons section). Another thing to consider is the fact that home warranties are getting more popular as years go by. Over the last four years, for example, the home warranty market experienced a 12% yearly compound annual growth rate.
It is quite convenient to have a home warranty
When you have a home warranty plan, you never need to think about contractors. You simply make the call to your company and they send someone over. This level of convenience is what makes many people purchase a home warranty plan in the first place. Many of us do not like searching for a specific contractor, looking up their reviews, learning about cleaning and maintaining kitchen appliances, etc. Home warranties provide a reprieve from all of that. Granted, you don’t get to choose your contractor, so this might be a con for some people.
- You will still need to pay service fees
- Numerous exclusions
- You don’t get to choose your contractors
All home warranties require you to pay service fees
The basic premise of a home warranty is that you pay for the service fees out of your own pocket. While this is perfectly acceptable with large repairs, it is quite less so if your problems are minor. At times, you can pay less by hiring a contractor on your own than by paying the service fee. Those situations are not as frequent, of course, but they can happen. Some home warranty companies charge as much as $125 per service fee, meaning that anything that would otherwise cost less to repair is a net loss for you.
Extending a home warranty may come with numerous coverage exclusions
All home warranties have significant exclusions. It is just how they work. No company is going to offer you full, “no-questions-asked”, coverage. That is why you need to carefully read the contract before extending your home warranty and fully understand the applicable exclusions. They differ from company to company so you might want to get offers from different home warranty companies before making the decision.
You can’t choose a contractor
Lastly, having a home warranty plan means that the company decides which contractor to send for repairs/replacements. While this is usually not a problem, as home warranty companies tend to work with reputable contractors, it can also be detrimental at times. If you are the type of person who likes to work with the people they know, extending your home warranty might not be in your best interest.
If you are looking for further information on home warranties or want to know what the best home warranty companies are, peruse the Consumer Opinion Guide. Our knowledge database will have all the answers for you!