ARE HOME WARRANTIES WORTH IT? The Myths and Reality of Home Warranties Revealed

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An extended warranty may be offered to you when you purchase a product. Do these warranties provide adequate protection for the price? A home warranty, according to financial expert Dave Ramsey, is not worth it. He says it’s a waste of money. Consider landlords who must deal with large repairs on expensive properties; are home warranties worth it for landlords like this? The myth is that home warranties may or may not work in certain situations. However, if you’re considering the best home warranties you can get for your rental properties, you’re probably doing your research on how they work, who the different providers are, and what to expect from the experience, as you should. This article helps you understand home warranty plans and how they work.

What Is a Home Warranty?

A home warranty is an annual service contract that protects you from the high cost of repairing or replacing your home’s major appliances and systems due to routine maintenance.

A home warranty should not be confused with home insurance. Home insurance covers much more, such as the risk of unusual damage to your home’s actual structure due to fire or flood, and it’s required with most mortgages.

What Does a Home Warranty Cover?

In most cases, a home warranty will pay for repairs to specific systems in a house, such as the HVAC, plumbing, and built-in appliances.

The homebuilder may offer a home warranty on a newly built home that covers structural defects for up to ten years; one year for items like walls and paint; and two years on HVAC, plumbing, and electrical systems. They also cover appliances for only six months and as well include the cost of the policy in the purchase price of the home.

Additionally, an existing home warranty can be purchased. The seller or real estate agent pays for the home warranty to expedite a transaction. These rules usually have a one-year coverage period.

A home buyer may choose to purchase a policy on rare occasions, such as when purchasing a foreclosure. Home warranty plans vary in their coverage, depending on the company you’re working with and the level of protection that suits your needs the most. To get more coverage (like a pool pump or garage door opener system), you’ll have to pay a higher monthly or annual fee to the company providing your warranty.

How Does a Home Warranty Work?  

For example, if your dishwasher breaks down and you’re not sure what’s wrong. If you have a home warranty, this is what you will do:

  • Contact the warranty company to report the issue.
  • A technician from the warranty company will come to your house to assess the situation.
  • The technician will report the issue to the warranty company.
  • If the repair covers your warranty, the company will pay for it.
  • If your warranty does not cover the problem, you must pay someone to repair it.

Regardless of whether or not the warranty is able to pay for the repair, they still charge a service fee for every call out. The fact that they ensure your house doesn’t mean that your repair bills are over for good!

How Much Does a Home Warranty Cost?

A home warranty plan may cost between $200 and $1,700 annually. Although you can break it down into monthly installments and pay it off. But whenever you call for repairs, you must pay an additional $75-125 service fee. The cost varies with the type of home you have and the extent of the coverage you desire.

It now depends on the type of property you own and the type of home warranty coverage plan you want. You should also consider the additional fees you will have to pay. Even if your home warranty says it will cover it, the work may be more expensive and you will still have to pay for it out of pocket. For example, if your dishwashing machine suddenly breaks, the warranty will most likely cover only half of what you paid for it. When you think about it, the home warranty doesn’t cover as much as they may advertise to you at first. It can be inconvenient to have to pay the other half of the cost to replace or repair it.

Are Home Warranties Worth It?

So, what does Dave Ramsey think about home warranties? According to Dave Ramsey, getting home warranties is not worth it for buyers or landlords. The dilemma is that a home warranty only covers the cheapest appliance you own. It is not worth it with the added cost of service fees and still putting in your own money. You’ll save money if you handle it yourself and call the service rather than paying for additional services. Instead, save the money for emergencies.

If you’re looking to get home warranties for your rental properties, American Home Shield offers one of the best plans and covers up to 23 appliances. They also state that if your covered item cannot be repaired, they will replace it. However, before you choose a home warranty solution, you should also consider their reviews.

The only time you should get a home warranty is if you are a seller looking for a good deal. When selling a home, adding the fact that it comes with a home warranty increases audience interest. For any reason whatsoever, Dave Ramsey does not want you to purchase a home warranty! Dave Ramsey suggests home warranties are not worth it and there are better alternatives to purchasing a home warranty. For example, setting aside three to six months’ worth of living expenses as a rainy-day fund.

You can also do this while following Dave Ramsey’s seven baby steps. Check to see if the appliances you purchased are covered by a warranty. Examine your appliances as well to ensure that everything is in working order. Maintaining and caring for these appliances will extend their lifespan. So, for the time being, just stick with what you have and listen to Dave Ramsey about better opportunities.

Are Home Warranties Worth It for Landlords?

Many landlords wonder if home warranties for their rental property are worth the effort. A home warranty can help cover some of the cost of major repairs, such as replacing an air conditioner, furnace, or major appliance. There are a few factors that landlords should consider before deciding whether home warranties are worth it for their rental properties. 

  • A good home warranty will provide adequate protection at a reasonable cost. However, there are many poor policies available that are far too expensive to be considered a good deal. 
  • It’s less likely that a newer appliance will need major repairs. There could be quite a few of the properties that are older and have older mechanicals.
  • Choosing a shoddy home warranty provider will result in a sluggish response time and a lack of service. This can be stressful for you because your tenant will expect you to complete the repairs before the lease expires.

In essence, home warranties are worth it for landlords if they can save money each month to cover unexpected repairs. A home warranty plan could be extremely beneficial if you have several older properties. It is entirely up to the landlord to obtain a home warranty for a rental property. They can differ depending on the age and quality of the rental, as well as the location.

Best Rental Property Companies For Home Home Warranties

According to This Old House research, the following are some of the best rental property companies for home warranties to consider:

#1. The American Home Shield

The best overall home warranty company for rental property is American Home Shield (AHS). The monthly premium ranges from $24.99 to $64.99 depending on the coverage plan and service charges.

#2. Choice Home Warranty

Choice Home Warranty is rated as having the best customer service for rental property home warranties, with offices in 48 states and a 12-year track record of success. The service plans range in price from $36.17 to $43.85 per month, with service fees ranging from $60 to $85.

#3. First American Home Warranty

If you’re looking to protect your rental property, First American Home Warranty is a great option for rental property owners. The company provides a First Class Upgrade service for landlords, which covers devices or appliances that were wrongfully set up or retained by the tenant.

#4. Liberty Home Guard

Even though the company is relatively new to the home warranty business, Liberty Home Guard has a high Better Business Bureau rating and a low service fee. Liberty Home Guard’s home warranty plans range in price from $39.99 to $59.99 per month, with a service charge of $60.

What Are the Benefits and Drawbacks of Home Warranties?

It’s hard to agree on whether home warranties are good or bad; some people think they’re downright ugly. So, what exactly is the truth?

Pros of a Home Warranties

Nobody wants to buy a house only to have the air conditioner break in the middle of their first summer there. Home warranties should provide you with peace of mind in situations like this. A home warranty can help in the following ways:

  • It Shields You From Unexpected Expenses. When you don’t have the money to cover the cost of repairing costly equipment and systems that break down, a warranty can help.
  • It Saves You Time and Trouble. If a home system or appliance fails, all you have to do is file a claim with your warranty provider, and they will take care of the rest. You don’t have to waste time gathering contractor quotes or attempting repairs on your own.

Cons of Home Warranties

In warranty agreements, the company can find several ways to make money by giving you less service than you need.

Here are a couple of examples:

  • Inadequate Maintenance. When a warranty company inspects your appliance, they may find an old part that needs to be replaced that you were unaware of. So they deny your repair claim because you did not properly “maintain” the appliance.
  • Repair Rather Than Replace. The company may insist on repairing an appliance even if you would prefer to replace it because it has kept failing so many times. However, they may refuse to replace it because they can still fix it; even if it is on its last legs.
  • Coverage Level. You may discover that the warranty company refuses to cover certain large-ticket items (such as an extremely old HVAC unit) or will not cover a repair because it is not covered by the type of warranty plan you have.
  • Lack of Options. For repairs and replacements, you won’t have much say in the contractor your warranty company chooses. You have no recourse if they are unprofessional. You also won’t have much say over the brand and model of replacement parts used by the contractor.


I hope this article helps you understand home warranty plans and how they work.

Are Home Warranties Worth It? FAQs

How long do most home warranties last?

A home warranty is typically valid for one year. Most home warranty providers, including 2-10 Home Buyers Warranty (2-10 HBW), provide a yearly service agreement that can be renewed each year.

Who has the best rated home warranty?

The American Home Shield (AHS) has the highest rating. It received 94 points out of a possible 100. Because of its comprehensive coverage, flexible service fees, and excellent industry reputation, we named it “Best Overall.”

Can you cancel a home warranty policy?

You can cancel a home warranty within 30 days of the order date to receive a refund of the contract fee less the $50 administrative fee and any service costs incurred.

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