Those who own homes might regularly receive mail advertising something called a home warranty. Many people end up tossing these leaflets away because they think this is just another form of home insurance, which many people get through their mortgage lender. In reality, a home warranty is not home insurance. Therefore, some people might be wondering whether or not a home warranty is worth the money.

There are a few important points that people should know.

What Is A Home Warranty?

A home warranty is similar to insurance is that people are going to pay a set premium per year to protect them against the risk of larger expenses down the road; however, people need to know what a home warranty is going to cover. This is where people need to read the policy. 

Typically, a home warranty is going to cover the cost to repair or replace certain appliances or home systems is they are damaged or break down. If someone needs to file a claim, this is usually done online or over the phone. Then, the homeowner is going to bring out a professional and pay a service fee (which is similar to a deductible) to get the repair completed. In some cases, the homeowner will have to pay the entire bill and get reimbursed later.

Is The Home Warranty Worth It?

In general, if someone has purchased a brand new home, this policy simply isn’t necessary. In many states, the builder is required to repair defects for a few years after the home is built. The common time-frames range from two years to ten years. Therefore, a home warranty might be duplicate coverage and, thus, unnecessary. Furthermore, brand new appliances are almost always protected by one or two-year warranties. Again, a home warranty might be duplicate coverage.

On the other hand, if someone has an older home or older appliances, the home warranty might be worth it. Older appliances are more likely to break down and, thus, require repairs. Therefore, people need to think about their own individual circumstances and weigh the risk of a broken appliance against the cost of the policy. A home warranty may be right for some people but not others.