Home warranty insurance is a type of protection that covers the costs associated with major home repairs. It differs from homeowners insurance in that homeowners protects against environmental disasters, vandalism, fire, and other catastrophes, while home warranty insurance covers the costs associated with individual components of the home, such as the HVAC system, appliances, plumbing, and so on.
While the idea of increased protection certainly sounds nice, you should reflect on a few things to decide if you really need this form of coverage.
How to Decide Whether You Need Home Warranty Insurance
Step 1: Examine your finances. The primary reason that people purchase homeowners insurance is for the peace of mind that it offers.
Whether or not this financial protection is worth it depends on your unique situation. If, for example, you have just shelled out all your savings to buy a home, then you don’t want to worry about a major HVAC repair in the next month. Home warranty insurance might be worth it for you.
Keep in mind, however, that besides the costs of the insurance itself, which is generally on the low side, there are also other fees. The trade fee is something you pay anytime you request that a serviceperson examine some issue with your home.
Another downside is that not everything is covered. If you have not properly maintained your appliances and one of them breaks, the insurance company can deny your claim. As “proper maintenance” is a fluid concept, you may not like the fact that your claim could be denied. Furthermore, you’ll still have to pay that trade fee no matter the outcome of your claim.
Consider all these factors, as well as your financial situation, to determine the most prudent course of action.
Step 2: Check for existing warranties. Manufacturers often provide warranties on appliances or services, which may render home warranty insurance unnecessary.
If you already have warranties on your most expensive appliances, then paying for extra coverage doesn’t make sense. You should determine which warranties are currently active and see what sort of protection you currently have.
You can always purchase a home warranty insurance policy that is specific to your situation. So, you can have coverage for your washer and dryer and plumbing, for example, but not for other parts of your home like the electrical system. You’ll get the most value for your money this way.
Step 3: Be honest about how handy you are. For some people, home warranty insurance is not necessary because they have the skills to conduct DIY repairs.
If you or someone you know has lots of experience fixing houses and doing repairs, then the level of coverage you want may change. If you can do most things by yourself, then you may not need home warranty insurance at all. If you have absolutely no experience, on the other hand, then you may want more coverage.
Step 4: Consider the age of your home. Another consideration that affects your decision to buy home warranty insurance is the age of your home.
If you are purchasing a home that was just built, the likelihood of something breaking is lower than in an older home. At the same time, if the appliances are all new and very expensive and don’t have any warranties on them, you may want some financial protection.
Also, with older homes, the level of maintenance and upkeep performed by the old owner may affect any future claims you make with your home warranty insurance. So, if the old owner really abused the plumbing and you have a disaster on your hands, you might be out of luck if you can’t prove that it was the old owner’s negligence that lead to the issue.