Thinking About a Home Warranty? Better Watch This Video First!

Are home warranties worth it? Home warranties are insurance policies, and they cover the cost of repairing or maybe replacing appliances and certain systems in your home, such as your HVAC or plumbing and even electrical systems. Now, they can offer peace of mind knowing that if something breaks, you won't have to shell out thousands of dollars for repairs. On the other hand, these contracts are not always so straightforward. I'll help you decide if home warranties are worth your hard-earned money.

Welcome to another edition of We're Talking Money. I'm Phil Clark, wealth advisor and founder of OmniStar Financial Group. Before we start, don't forget to like, share and subscribe for more videos on various topics related to personal finance and budgeting, investments and more. Our team is committed to empowering individuals and couples just like you to achieve financial freedom and live their best life.

First, what is a home warranty? A home warranty covers service, repair or in some cases replacement of your major home systems and appliances. They're designed to be a financial buffer in case a big-ticket item suddenly stops working. Consumers can purchase these warranties for around, say, 350 to maybe 650 dollars per year. In some cases, they extend the manufacturer's warranties.

Of course, one of the big selling points is one call does it all. That's quite an appeal. In other words, for any problems with an appliance or system that's covered by your plan, the warranty company connects you with their approved contractors, taking that task off your plate.

Don't be wooed before you take a close look, however, at the contract. You really need to understand what is and is not covered. Now, these warranties have limitations and some exclusions that may leave you disappointed when you need the most.

Second, consider the age of your appliances and systems. Depending on where they are in their lifespan, it may or may not be worth investing in a warranty. In these cases, it could be more cost effective to save up for future repairs or replacement.

Now, that's because when an issue arises with an appliance or a system that's named in the contract, you can submit a service request, and the home warranty company will dispatch a contractor to diagnose and then repair or possibly replace the item. But replacement is usually a last resort. Each service call, in addition to a deductible, requires that you pay a service fee, and that service fee can range maybe from sixty dollars to a hundred and fifty dollars, depending on the service and the type of contract you've purchased. And you might be responsible again for a deductible, and that also depends on contract language. Now, the warranty company, they can decide to replace the item with a comparable alternative or provide a cash settlement based on the warranty company's charge limits.

Third, think about your overall budget. Home warranties can be an added expense, and if you're already tight on finances, may not be the best option for you. On the other hand, normal wear and tear on your home's major systems, that's not covered by homeowners insurance. So depending on the age of your home and appliances, you may want to consider getting a home warranty.

A home warranty might make sense for you if you have older appliances you're concerned about, parts of your home that are more expensive, such as pools and roofs. Maybe you don't have sufficient savings or an emergency fund, or you don't feel comfortable or confident that you can fix your home systems on your own. Or maybe you don't want to deal with hiring that contractor yourself when something goes wrong. Maybe you just want the peace of mind.

I know people that have saved thousands of dollars on expensive repairs. In fact, just a few years ago, one of my friends saved the cost of a new HVAC unit. Now, full disclosure here, it was not as simple as it sounds. In fact, it took months to finally get the unit replaced after multiple repairs. Certainly some co-payments were made, and ultimately a deductible, and a few months of living without air conditioning during the hottest part of summer. In the end, the warranty, it was well worth her cost.

Now, when is it not worth getting a home warranty? You may not want to consider a home warranty if you are buying a new construction home. You may already have a manufacturer's warranty on everything in the home, and so a home warranty really wouldn't be worth anything to you. Now, you may not want a home warranty if you think the cost for the home warranty will be more expensive than the actual item you believe would need to be replaced, or if you would rather take the chance that nothing will break down in your home. Some people believe that. Or you'd rather choose your own contractor instead of relying on the warranty company to choose the contractor for you.

And lastly, consider your DIY skills, that is, the do-it-yourself skills, and your available time. If you're handy around the house and you have the time to perform these minor repairs, you may not need a home warranty. But if you prefer to leave it to the professionals, or maybe you have a busy schedule that simply doesn't allow you to commit to a DIY project, a home warranty could be the perfect solution.

These warranties can provide valuable protection and peace of mind, but they may not be worth it for everyone. Make sure to thoroughly read the contract, consider the age of your appliances, evaluate your budget. If you don't have a budget, please make one. It makes it a lot easier, by the way, to decide on things like a home warranty when you understand your budget. And assess your DIY capabilities.

If you decide to purchase a home warranty, here are some of our top picks: American Home Shield and America's First Choice Home Club.

Thanks for watching today. I hope this video has inspired you to do a little research before you rush out and buy a home warranty. If you found this video helpful, please subscribe to our channel, smash that like button and ring the bell so you never miss another great episode on financial tips and advice. I'll see you next time on We're Talking Money.

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