I have often been asked as to whether a Home Owners Warranty is a worthwhile purchase. To answer this query we have to look at the cost vs. the benefit.
Warranties can range in price from $400 to $600 a year cover the majority of items in a home; with optional items like hot tubs and well pumps at an additional cost. There is a deductible per item ranging from $60 to $150.
Let me give you a couple of examples:
Example #1
We recently had our garage door opener and our stove element break, the cost to me was $60 per item totalling $120. Had I not had a warranty the door opener would have cost $130 plus labour and the stove element would have cost $75 plus labour. So far in this warranty period (June 08 - June 09) I have spent $500 for the warranty and $120 in deductibles totalling $620. Had I not had the warranty I would have spent $205 for parts and an additional $100 or so for labour totalling $305.
So far I am out $315 for the year (I really don't want anything else to break, however, it would be nice to recoup this loss)
Example #2
In 2002 we owned a warranty on our last home the cost in those days was $375 a year - that year the following items failed and needed replacing:
Hot water heater
Heat pump/Air Handler
Dishwasher
Total cost to me to replace all these items was $375 plus $400 in deductibles totalling $775. Had I not had the warranty that year I would have been looking at over $4000 in replacement expenses.
One doesn't know when things are going to breakdown, however, one can have an educated guess as to when items in our homes will be wearing out and need replacement or fixing.
If we purchase a resale home with items that no longer have their original warranties the $500 for the warranty certainly provides us "peace of mind" - in the course of 10 years we would be spending $5000 for warranties, however, we could also be replacing our hot water heater, washer, dryer, stove, fridge, heat pump, air handler and so on......
Personally I like the peace of mind......
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