Is a Home-Repair Warranty Worth Your Money?

Say it’s the fifth day of temperatures over 98 degrees in South Carolina during a summer of record heat. Your air conditioning system has kept you cool through it all. That is, until now. The unit is still spinning, but the air coming out isn’t cool. The temperature in your house starts to climb. What do you do?

If you're like most people, you Google “A/C repair” and start making calls. But you don’t want to pay service fees to three different companies just to come and see what the problem is. Getting comparative estimates won’t work because you don't have the time. Besides, the whole family insists they're “dying” from the heat. You quickly pick a company to fix the A/C and that’s that.

Once you get through the A/C crisis, you start to wonder if maybe you should get a home-repair warranty. But is something like that a good deal?

My family has had a warranty on our 28-year-old home for about 10 years. It initially ran us about $300 a year with a $35 fee per repair visit. The premium and the visit fee increased every year until recently, when I took the time to shop around and find a better deal.

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That said, even with lower rates, the numbers alone don’t support the wisdom of that purchase. So why do I have a home-repair warranty?

Peace of Mind

The warranty gives me peace of mind. When something breaks, the company sends a repair company to fix it. I pay $45 each time I schedule a visit, but there is no cost for the rest of the repair.

I don’t think this saves us money on repairs overall. However, I like the fact that the warranty company calls a repair firm and then monitors how much is charged.

So if my refrigerator breaks, for instance, I am protected from price inflation.  I know it is in the interest of the home warranty company to find firms that are both reputable and inexpensive.

It also helps me resolve a situation in which the repair shop doesn’t do the work correctly. If this happens, the warranty company will handle the additional cost and repairs on my behalf. Appliance and system repairs are rarely necessary at my house. As such, I don’t have a network of contractors I know and trust.

Thankfully, my home-repair warranty company vets the companies for me, manages what is charged, and resolves any problems. That’s worth the yearly warranty cost to me.

Home-Repair Warranties Get Mixed Reviews

Despite my personal preferences, when I did some research, I found no consensus on whether a home-repair warranty is a good idea for an older home. (All the sources I read said to avoid them for new homes.)

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Some experts recommend avoiding warranties because of the hundreds of dollars these contracts can cost. They suggest buying reliable products and keeping those warranties up to date.

Seems sensible if you have the time and organizational skills to remember when everything from your furnace to your dishwasher needs to be serviced and have the time to wait for the service people to show up during your work week. The money saved from not purchasing a home warranty can be put in a  savings account or repair fund.

However, some real estate agents believe they are paramount. “I highly recommend all buyers purchase a home warranty for their home,” says John Myers, owner of Myers & Myers Real Estate.

“Many homebuyers think they do not need a home warranty because they had a full home inspection completed on their home,” Myers adds. “However, inspectors are not perfect and do not have x-ray vision to see behind the walls of your home.”

“A home warranty provides a level of financial comfort in case something major happens after you purchase your home,” Myers continues.

And some personal finance experts also point to the added benefit of peace of mind, which can make a home warranty worth the cost for some people.

Is a Home-Repair Warranty Right for You?

Your personality and risk tolerance will, of course, factor into your decision-making, as will your existing network of repair companies. If you typically avoid risk, you’ll probably feel more comfortable knowing your maximum out-of-pocket yearly repair costs.

Or if you don’t know much about appliance repair and don’t know whether to trust the repair companies in your area, you may like having a home-repair warranty.

On the other hand, if you are kind of handy and can do some work on the house yourself, or you are confident you can find service providers you like and trust, you may want to forgo the warranty.

Shop Around

If you decide you want a home-repair warranty, shop around and compare options. “Make sure you read the warranty and you understand what is covered and if there are any additional costs you may have to pay,” Myers says. 

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