Perhaps you’ve seen television ads for home warranties where companies tout plans for less than a dollar per day and paid actors tell us life at home has been worry free knowing they have coverage for repairs and replacements for a range of household items.

There are two schools of thought about the worth of home warranties. Here is some information that can help you decide whether or not purchasing a home warranty plan is right for you.

What is a Home Warranty?

A home warranty is a contract covering repairs and replacements on major systems and appliances such as A/C, electrical, plumbing, dishwashers, and refrigerators. On average, home warranties cost $300 to $600/year for a comprehensive plan that covers appliances and systems.

If one of the appliances covered under your warranty breaks down and requires a technician to come to your house, plans charge a service call fee to file a claim, which can range from an average of $65 to $125 or more. Home warranties also have different tiers, with premium tiers covering add-ons like a pool and spa, but those plans cost more-between $720 and $1,800.

Difference between a Home Warranty and Home Insurance

Home warranties are designed to protect your home’s appliances and systems from breakdowns caused by normal wear and tear, while homeowners insurance pays for damages and loss caused by unexpected events such as fire and weather damage.

How a Home Warranty Works

A home warranty works similarly to any other insurance policy. Each year that you want to be covered under the warranty, you pay an annual premium. This can range anywhere from a few hundred to a thousand dollars, depending on the size of your home.

Usually, homes of up to 5,000 feet in size are covered under the standard warranty; above that you have to pay for additional coverage. Thereafter, each time something in your home breaks down, you pay a deductible. The exact amount of your deductible will vary, according to the terms of your warranty. The warranty company will send out a service to make the necessary repairs, or they will replace your appliance, if needed.

Benefits of Home Warranty

1. The biggest benefit to a home warranty is peace of mind. If something breaks, you know that a professional will come out and fix it, no questions asked. For this reason, a home warranty is a good choice for homeowners who are not very handy. It can also be beneficial to first-timers who may not be as familiar with how their new home’s systems work.
2. Existing issues with your systems and appliances should be found during your home inspection and addressed prior to you taking ownership of the home, if you negotiated repairs and replacements. Warranty companies consider problems identified during a home inspection as “known conditions” and often do not cover them, but they generally will cover “unknown conditions,” issues that would not have been revealed through a normal home inspection or ones that develop after you move in.
3. It can be a wise money move for those who need to budget carefully or like to be ahead of the game with their financial planning. Why? With a home warranty there are fewer unanticipated costs. You will know what your premium costs upfront and you will know what your deductible is for any repairs that are covered under the warranty, making it that much easier to handle the unexpected.
4. A home warranty can be an incentive for buyers. It means that if there were past repairs, only professionals did them on time and in a satisfactory way. It also means that the new homeowners will have the same coverage in case anything goes wrong. This will give them the same peace of mind that you have.

Estelia Mesimer, REMAX/Metro realtor in St. Petersburg, FL says that when it comes to home warranties, “The best deals can often be secured if purchased at the same time you buy your home”.

She goes on to say that a home warranty can help homebuyers with better financial planning, as they don’t need to worry about saving for home repairs that may be inevitable at any time.

As an investor herself, Estelia recommends home warranties for landlords who do not want to field repair calls from their tenants. “If you have a home warranty, you can cut right to the chase, thereby keeping your tenants happy and minimizing your stress.”

Downside of Home Warranty

1. The most obvious drawback is that not everything is covered so you will need to read the specific terms of your plan to get a sense of the individual exclusions. A home warranty will not cover appliances that have not been “properly maintained”. This clause is often the cause of disputes between the homeowner and the warranty company, particularly if the previous owner did not take care of the appliance and now the new homeowner is left holding the bag.
2. Another drawback is that each year money is paid upfront under the assumption that repairs will eventually need to be made; however, that may or may not be the case. Some years everything may work fine, but you’ll have paid the premium.

Florida’s Top 4 Home Warranty Companies as rated by This Old House

American Home Shield (AHS): Best Overall
Choice Home Warranty: Best Service
Select Home Warranty: Lowest Deductible
First American Home Warranty: Best Value

Bottom Line: Because you may not know how the previous owner cared for the household appliances, a home warranty can be helpful. However, you need to carefully read the service contract and remember that appliance maintenance is key to successful home warranty claims processing. It’s always good to have an emergency fund for unforeseen expenses, even with a home warranty to save the budget.

St. Petersburg Communities

Allendale Terrace
Bahama Shores
Bayway Isles
Coquina Key
Crescent Heights
Crescent Lake
Downtown
Greater Pinellas Point
Historic Kenwood
Historic Old Northeast
Historic Roser Park
Historic Uptown
Isla del Sol
Old Southeast
Placida Bayou
Snell Isle

If you’re interested in any of these of communities or live in one and are thinking of selling, talk to The Mesimer Team.