Should I Buy and Extended Home Warranty??

When you buy a home in Glendale or elsewhere, you'll be given the opportunity to purchase an extended home warranty. For some home buyers, this is a completely unfamiliar product and they might accept or decline with little information. Even for home buyers who've purchased before, there are aspects of home warranties which are unknown. This is due to the fact that such products aren't marketed widely, and, are typically associated with new construction purchases offered by builders.

Should I Buy an Extended Home Warranty?

So, what exactly is an extended home warranty? Well, it doesn't actually cover the home, that's what homeowners insurance is for and does cover things such as the structure and provides protection for residents and guests. Extended home warranties vary from company to company, but largely, these provide coverage for appliances and systems. These can include, but are not limited to: electrical wiring, plumbing, HVAC units, water heaters, garbage disposals, refrigerators, dishwashers, clothes washers and dryers, smoke detectors, ceiling fans, garage door openers, and, ranges and ovens.

Even though home warranties aren't considered insurance, the companies that sell them are typically regulated by each state's department of insurance. According to the Service Contract Industry Council, 32 states require home warranty companies to register or obtain a license with that state's department of insurance. This state agency is responsible for licensing the entity, examines the company for compliance of applicable laws regarding home warranty services and monitors the financial condition of the company for the protection of their clients. --Angie’s List

In addition to these, homeowners are generally given an option to cover other systems and appliances. The average cost of home warranties ranges from $350 to $500 per year, with enhanced plans costing an additional $100 to $300 per year. In all, plans can average between $29 to $67, when broken down into months, but, plans are typically purchased or renewed once a year. In general a home warranty is a great marketing tool for sellers because it gives buyers peace-of-mind and tells them you're serious about selling. For home buyers, home warranties are a bit different and are generally not worthwhile purchases due to the following reasons:

1. Repairs fees are not always inclusive. Though you might pay up-to $800 per year for a home warranty, the service call you make will likely still cost you out-of-pocket, ranging from $50 to $75 per service call.
2. Appliance breakdowns are rare. Another factor to consider is technology advancement, which is substantial and causes appliances to last much longer and perform without breakdown. In fact, breakdowns only occur in 1 and 5 homes within the first three years of purchase. What's more, if problems occur in the first year, it will be covered by the manufacturer's warranty.
3. You might already be covered. Your homeowners insurance, extended product warranty, and other coverage are good reasons not to purchase a home warranty. It's important to understand the ratio between value and cost when purchasing an extended product warranty. In addition, most states require structural elements to be covered for 10 years by builders.
4. The cost of appliance repair is minimal. The same $50 to $75 you'll pay in additional service call fees with a home warranty is about equal to what you would normally pay even if you didn't have extra coverage.
5. There's no guarantee you'll be covered. If you look at home warranty disclaimers, you'll probably discover the coverage isn't comprehensive. Some companies only cover certain items and the rest you must pay out-of-pocket.

However, all this doesn't mean home warranties should always be avoided. For instance, if you have a $6,000 Viking range, it's best to have an appropriate amount of coverage and peace-of-mind. In the alternative, you can easily self-insure by setting aside money every month.

If you are just starting your search in Glendale, AZ or anywhere in the greater Phoenix area, feel free to reach out and ask any and all questions you may have. I'm here to help and happy to do so.