Understanding the costs and benefits of home warranties

Home warranties can provide you with peace of mind, but they can also be a headache if you don’t do your homework. There are some things home buyers need to know about the cost–benefit divide.

A home warranty typically covers the major systems and appliances in a home for one year after the sale. It’s often included with the purchase of a home, but many homeowners don’t fully examine the documents at closing. Instead, they file them away until they need repair help.

“They are surprised, when they have a problem and try to use their home warranty, to find out that it doesn’t work as they expected it, or the item they have a problem with isn’t covered,” said Angie’s List founder Angie Hicks. “Also, we see concerns over the quality of the technicians that are being sent out to do the repairs, and also the fact that the consumer is giving up their decision as to whether they should repair or replace the item.”

Lindsay Ohmer received a home warranty when she bought her house and she says it came in handy when the heat went out over the winter.

“We just hopped on the website and filed a claim really fast, and within a few hours we had somebody out here taking care of it for us,” Ohmer said.

Angie’s List says the key to a good experience is to understand what is and isn’t covered.

“Be sure that you take the time to read through the contract so you understand exactly how it works, because there is nothing more frustrating than when something breaks, and then you have to go read the document. You want to be prepared ahead of time,” added Hicks.

Angie’s List says homeowners can expect to pay between $250 and $450 per year for a home warranty. The fee per incident ranges from $50 to $75. They also recommend knowing the age of your appliances to determine whether a home warranty is really a good deal. You may find you have new appliances that are already covered under the manufacturer’s warranty.