Is a Home Warranty worth it?

When performing New Jersey Home Inspections, we frequently inspect homes that are advertised as having a home warranty. Owe we may hear the buyers talking about purchasing a home warranty.  We have heard mixed reviews about the home warranties, and recently read a post at an online home inspector forum asking how a warranty company could charge such a low fee for the service that it apparently provided.  We decided to do a little research on our own. First, let’s talk a little about a home warranty,

What is a Home Warranty?

A home warranty is typically a service contract, which should cover the heating system(s), cooling system(s), electrical, plumbing, water heater(s), kitchen appliances, and possibly other items depending on the contract, which may even include the roof and foundation.  The sales pitch for these contracts is that if an item in the home fails, such as the furnace (on a cold, cold day), you won’t be burdened with unexpected expenses, and the warranty will cover the repairs.

What does a Home Warranty cost?

A typical new home warranty costs about $500, but prices vary depending on the options selected.

The warranty company will have a list of service providers to perform the repairs, but only up to a certain dollar amount.  For instance, one popular warranty program will cover up to $1,500.00 towards a heating system repair.  While this would obviously cover the cost of the warranty program, this would only put a dent in the cost to replace a gas boiler.  There is also a deductible that the owner must pay each time, regardless of the cost of the repair.

What to watch out for with a Home Warranty?

One of the most important limitations to be aware of is that pre-existing conditions are not covered, lack of maintenance is not covered, and items that have not been properly installed are also not covered.  As a home inspector, we typically find a great amount of items which were not properly installed.  Recently we have seen several power-vented water heaters that were newly installed with permits and inspected, but were nevertheless improperly installed.

Is a Home Warranty worth it?

So how can a $500.00 warranty cover all of these expensive repairs?  Many of the service claims get denied due to pre-existing conditions, improper installations, or improper maintenance. The warranty companies will ask their service providers questions for information that could be used to deny a service claim, and will frequently find one.  If the warranties didn’t exclude so many things, the price of the warranty would have to be much higher.

Why is a New Jersey home inspector writing about home warranties?

Because it’s our mission to identify defects with installations and identify items that are not in proper working order when conducting our inspections, and it’s important to know about these things ahead of time.  Purchasing a warranty to cover repairs to defective household items may sound silly, but we have seen many people purchase them.  Home warranties have their worth, especially for items that have been properly maintained and are at the end of their serviceable life, but we would strongly recommend reading all the fine print before purchasing a home warranty.

For reviews of different home warranty companies, check out

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