If you own a house, you’ve probably heard about a home warranty. You may not understand everything this benefit entails, so it is helpful to learn more about it and why it may make sense. A home warranty from American Home Shield might not be right for every homeowner in every situation, but there are times when it is financially a good decision.
It is no secret that fixing and replacing appliances and home systems can be expensive. If you are on a tight budget and don’t have much money to spare, it can be stressful and overwhelming when something at home stops working efficiently or breaks. Warranties can give you peace of mind in these situations. Instead of wondering where you are going to come up with the cash to pay for these needs, you can tap into this coverage and pay minimally out of pocket.
The Basics
When you have a mortgage, you are required to have homeowner’s insurance. You must have a policy, and it will cover losses and damage to your home if there is a disaster or catastrophe. A home warranty works a little differently. This plan also will fix and replace items in your home when they no longer work. However, a warranty covers appliances and systems that suffer wear and tear or break unexpectedly.
You have a few options to choose from with a home warranty, but they generally last for a year. Once it expires, you can renew it, though continuous coverage is not necessary. You can buy a warranty at the time you close on your home, or you can purchase it later.
The warranty will cover appliances such as refrigerators, dishwashers, water heaters, washers, dryers, stoves, and ovens. It will apply to the roof and sprinkling system of your home, as well as to the HVAC, electrical, and plumbing systems. Small appliances do not fall under the warranty’s coverage.
Warranty Costs
Just like with an insurance policy, you will have a premium to pay when you buy a warranty. Some companies allow you to break up the premium into monthly payments, while others will require an upfront payment. Most plans costs between $300 and $700 a year. Along with paying these costs, you will also have to pay for the service call fee when the technician comes to your home to assess the problem with the appliance or system. This out-of-pocket cost is usually between $50 and $150.
Repair and Replacement Costs for Appliances and Systems
It is inevitable that your home appliances and systems will sputter and break down. Nothing lasts forever, and even the highest-quality items will eventually wear out and stop working.
Minor repairs will not set you back much, but for moderate or extensive repairs, the costs can be crippling. If you need to replace a few parts in a dishwasher, you could pay a couple of hundred dollars. Repairing the mechanical components in your air conditioner could be several hundred. The repair costs can increase significantly when your plumbing or electrical systems go haywire. Paying a technician to fix problems in these areas can approach or exceed a thousand dollars.
If the damage is extensive enough, it may be necessary to replace the appliance or the entire system. The technician will determine whether this is required. A new installation of an electrical, HVAC, or plumbing system can cost thousands, if not tens of thousands of dollars. This includes the parts and labor of the project. Having a home warranty can spare you from this financial headache entirely.
Seeing the Savings
As you evaluate your financial responsibilities with appliance and systems repairs, it is clear to see how you can save hundreds of dollars per issue. Using your warranty protection for one instance may be enough to make the warranty pay for itself. If you have multiple repair needs, the savings start to add up considerably. For example, if your warranty costs $500 a year, but you have to pay for a new dishwasher and a new range in the same month, you could save well over a thousand dollars.
Be Aware of the Exceptions
Your home warranty will not cover every repair situation. It will not be valid if you break the appliance in question on purpose or if you misuse it. There is also a limit on how much the warranty will cover per item per year. Anything over this amount will be your responsibility. A typical home warranty will have coverage limits of anything between $500 and $2,000.
Repair costs with home appliances and systems can be expensive. If you are not in a financial position to manage these costs, it can be stressful. You may even have to forego fixing something if you don’t have to money to do so. A home warranty can solve many of these concerns. The cost savings can be significant, and you can put that money toward other home-improvement needs.
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