Are Home Warranties Worth It?

House with Bay Windows, circa 1880

The other day on Facebook I asked for opinions regarding renewing our home warranty. The majority of people said they would renew their home warranty. I’m still not convinced it is the best deal for us since our house is newer and probably won’t need any major items replaced for several years.

Yesterday I stumbled across this video from Clark Howard. He recommends NOT buying an home warranty. His reason, people are almost alway dissatisfied with the warranty company.

For our warranty the price is $500 to renew and then $75 for each service call. We would have to anticipate over $500 in repairs over the next year for it to be worth it. I can’t decide.

What do you think? Do you have a home warranty? Has it been worth it?

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  1. We bought a house earlier this month. The sellers included one year of a home warranty. The DAY WE CLOSED, we had to file a claim! The AC wasn’t working. We have a $100 deductible and so far, it hasn’t saved us much money, but you never know what the next 11 months will bring.

    This house is 11 years old and it’s possible that appliances will start to break. So we’ll see how this year goes and perhaps we will renew, or perhaps we’ll self-insure. Hard to say, but right now I’m glad we have it!

  2. What I know about home warranties I learned from Dave Ramsey. Ultimately, home warranties are a statistical game, and home owners are usually the losers. For example, you pay $500 for a year’s coverage. The odds are in the company’s favor that you will not have a claim above $500, otherwise, they wouldn’t make any money. Yes, you could have a big breakdown and go way over that $500, but the odds are you won’t. You’re better off setting aside that $500 in an emergency fund for your home.

  3. We purchased our home 15 years ago with the first year of home warranty paid for. Our home is over 135 years old, so for me, that means it was worth it!

    Over the course of time, we’ve paid out (in premiums and deductible fees) about $5500. BUT we have had close to $5000 worth of appliances replaced, as well as several thousand dollars worth of electrical work and plumbing work done. For us, in the long run, it has most definitely been worth it. We are now getting to the place of having appliances replaced that were replaced when we first purchased our home.

    Over the course of these 15 years, we have saved over $2500. If we had a newer home it would not have been worth it because we wouldn’t have the plumbing and electrical problems needing updated and we haven’t spent enough on replacing appliances as we have paid out in premiums.

  4. The seller of our house included a home warranty so we really didn’t have a choice. The AC unit was very old and needed to be replaced. We decided to wait and see if it would break during that first year but of course it did not. Even if it had, the maximum allowable reimbursement for a new unit (if they would even completely replace it) would have been $1,500. After our warranty expired we decided to spend $4000 replacing the unit. Our saving on energy have been very noticeable and I’m so glad we replaced it. If the warranty had not been in place we would have replaced it sooner. Make sure you look at the maximum allowable amounts for each category of repairs. Also keep in mind that many technicians who work for home warranty companies aren’t necessarily the most thorough and careful.

  5. Funny that I was just talking about this same thing earlier today with a friend who’s AC broke this week. They have renewed theirs for several years and have loved it, but she couldn’t remember the name of the company they’ve used.
    We only used ours once during the first year that we were “given” with our house purchase (saved about $110 after the deductible) and did NOT renew after. Now, our house is about 16 years old and still has the original AC, and our washer/dryer are getting up there in years too and being used more than ever now that I’m cloth diapering my little guy. I haven’t signed up for another warranty yet, but I think about it every time I get info in the mail about it. AC replacement alone would make it worthwhile, but 1-2 repairs generally doesn’t make it cost effective.
    Tough call, for sure.

  6. With the service call fees, and lots and lots of exclusions, we have never used a home warranty – even when our sewer backed up. The warranty only covered the first 100ft of sewer line. Ours had collapsed at 103. We’ve never had enough reason to renew. Too much for too little.

  7. We’ve only had a warranty when the seller included it in the sale. We’ve tried to use it, and found it hard to get service, and then we had to pay more than the deductible. It was in the fine print in the contract, but it just seemed wrong. Rubbed me wrong ever since. When we sell a house, we tell the agent that we’re willing to offer a warranty if the buyer requests it. It gives them piece of mind.

  8. In my experience, NO. If I were buying a home we might ask for it among the bells and whistles, but I wouldn’t pay for one. There are limited companies the warranty will work with, they’re always hard to book, and they inflate with extras. For example, when we called about our AC, the company refused to make the covered repair until we updated the AC closet “for safety.” The safety updates were not covered by the warranty. In other words, we would have to kick out several hundred dollars before they would do the “covered” repairs–and the warranty company wouldn’t work with any other AC company. We refused and called another AC company who told it that was all nonsense and made the needed repair–for about $75.

  9. Warranties in general don’t typically prove worthwhile (ever). My husband and I keep up an adequate house emergency fund for things that need to be replaced/repaired… our house was built in 1945, and we haven’t had anything happen that has broken the bank yet (because we have money specifically designated for things that happen)! Preparation is key – I’d take that $500 and put it in a mutual fund money market where it will stay OUR money (and grow), rather than give it away to a warrantee company and risk the chance of it disappearing if we never have the use for it. Just like Justine said, it would take a lot to make it cost effective.

    Dave Ramsey ( has some of the best financial advice I’ve ever come across… from insurance to investing to things like home warranties. My husband and I both took his Financial Peace University class right after we got married – best decision we ever made. (I’m not a spokesperson or anything – just love his ideas!)

  10. i’ve never even heard of home warranties before. is this a regional thing? i’m in the seattle area, and i know for us, it was never discussed, and i’ve never even known of anyone having a home warranty. it’s an interesting idea, but i personally wouldn’t get one, if i had a good inspection done. i’m guessing it’s similar to how computer warranties are, where if you just put the money from all the warranties you’re offered into a separate savings account, then used that whenever you had a problem, you’d be ahead… 🙂

  11. We were the first owners of our last home and it didn’t make financial sense to purchase one then. However, we recently moved across the country to a completely different climate and a 20 year old home. The warranty was included @ closing. Had it not been, I would have purchased it in this particular case. My brother is a landlord and has used his with no complaints.

  12. We struggled with this same question but, only briefly. When we bought our home 2 years ago, the realtor suggested we buy a home warranty but we declined, knowing that we had a good emergency fund built up. The house is 15 years old and we knew there would likely be things pop up that needed repaired. In the two years we’ve owned it, I have replaced the pool pump motor, flow sensor and the dishwasher at a total cost of about 600.00. If you add the deductible for each of those 3 services, plus the cost of 2 years of insurance, I came out ahead without it.

  13. Well, I’ve used auto warranties before so wouldn’t probably hesitate much…if it fit in the budget.

  14. My husband is an a/c and appliance repairman. To our friends he would reccomend not getting a warranty. You never seem to get your money out of it. He says with the company he works for warranties end up being pure profit.

  15. We pay $60 a monh with a $75 dedudictible- and have more than made our money back, if oly in convenience and peace of mind- our A/c went out , and our garage door snapped off with the van trapped in the garage. Our water heater is 20-some-odd years old and is about to be replacd for $7. We have a good company with few exclusions.That being said, there’s a very good reason it gives me peace of mid- our house is rented out to another family since we’re militar and out of state. This makes it very easy for our property manager to take cre o it, and not have to call arund for quotes.

  16. I agree completely with what another commenter said: As per Dave Ramsey, set aside an emergency fund of $500. Then, keep adding to it, so that when you DO need to use it, you have the money saved.

    We bought home warranties for two different houses we’ve owned and NEVER gotten our money out of it once the deductible and/or house call fees were paid. We also found that many of the things that can go wrong are not even covered by the home warranty.

    I guess my advice would be to forego the warranty and just save your money in a special fund for home repairs. Insure yourself, basically.

  17. We pay $40 a month, a $55 deductable and have saved so much already with the two claims that we had to file (electrical work and a new water heater). But once we replace all the things that could go wrong we might get rid of it, but so far it has been the best investment for us

  18. We pay $30 per month here in AZ for the premium package, which even covers our appliances. I think it’s worth it and we only pay $45 for them to come out. After three visits for the same problem, they will replace the broken item. The last company we were with kept going up on their rates, so we found another company and we’ve been happy with them thus far!

    We’ll be moving out of state next year and we are going to rent out our house. I think the warranty will ease our minds a bit.

  19. We have had such bad experiences with a certain home warranty company (initials AHS) that we will NEVER have another home warranty. That company has recently rearranged their program so you can purchase different levels or a warranty. That won’t change our mind because of the poor customer service we experienced. We had a dishwasher that needed repaired. The company sent a repairman who was extremely unprofessional. He said he would fix the problem but needed to order a part. We waited weeks and never heard back. We learned the repairman lied about our dishwasher to the warranty company. The warranty company disregarded our complaint and were rude at every level. I filed a complaint with the BBB against the repairman and received a nasty letter from them calling me the liar. I learned this repairman had several complaints filed against him at the BBB.
    Why would I want to do business with a warranty company that contracts such as this dishonest repairman.
    It is definitely NOT worth the aggravation and hair pulling to have a home warranty, especially with AHS.

  20. Julie Goodson says:

    Tija–what warranty company do you use– we also live in Az and that sounds great!

  21. I bought a 20 year old foreclosed condo. The bank (seller) included a 1 year home warranty. I needed to use it 3 weeks after I moved in. The place sat empty for a few years, so things had rusted and corroded over that time. I first needed a new garbage disposal. I had a $45 co pay, but for a disabled single woman who didn’t have anyone to make the repair for me I felt that it was worth it. A few months later my heating system developed a leak. The heating system in the condo complex is a water based “hydronic” system. I am not sure how much the total repair cost, but I’m sure it was upwards of $1,000 at least to order new pipes and the labor to remove the old and weld in the new. I was happy with the service so I renewed my policy again, only to find out that the co pay had gone up to $60. I am now nearing the end of my 2nd contract, and again my heating system is on the blink. Because the heating system is intertwined with the plumbing, the warranty company has been very cooperative in that no contractors have been able to agree as to what the problem is. A plumber says it’s my heating system, a heating (hydronic) specialist says that it’s the water heater and I have had 2 plumbing companies and 2 heating companies out to evaluate the problem. This has gone back and forth for nearly 2 months now. I finally got a new water heater this weekend and that didn’t fix the problem, and in fact it is worse. I called the warranty company in the middle of the night and they are sending out another heating company technician to re-evaluate the problem again. The problem hasn’t been with the warranty company, the problems have been with the contractors. Where before I had hot water if I turned on my heat, now I am left with no hot water and had to take a cold shower this morning (I couldn’t stand to wait another day!!!). I have just written out a check to renew for another year. I figure I’ve gotten my money’s worth, since it seems that my place has had issues due to age and sitting empty for years while in foreclosure. I know it’s a gamble, but I think it’s been worth it for me.

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