Is a home warranty worth it?

What a home warranty is (and isn’t)

A home warranty is a service contract. You pay a fee, and the company agrees to arrange or pay for certain repairs or replacements. It isn’t homeowners insurance, which covers sudden damage like fire or a burst pipe, and it isn’t the manufacturer’s warranty that comes with a new appliance. In Illinois, the Service Contract Act says service contracts can’t be sold in the state until the provider registers with the Illinois Department of Insurance.

When it can make sense

• You just bought an older home and don’t have savings set aside for a surprise repair.
• Several major appliances or systems are near the end of their life, and you’d rather pay a predictable fee.
• A seller is paying for the first year as part of the sale. Read the contract anyway so you know how claims work.

When it often doesn’t

• Your systems and appliances are new and still under the manufacturer’s warranty.
• You can cover a typical repair from savings. Putting the plan price into an emergency fund keeps the money yours if nothing breaks.
• The coverage caps are low compared with the items you’re most worried about, like the furnace or water heater.

Questions to ask any provider

• Can I see the full contract before I pay?
• What is the service-call fee, and is it charged per visit or per claim?
• What’s the payout cap for HVAC, plumbing and each appliance?
• Who chooses the technician, and how long do repairs usually take to schedule?
• What happens if the item can’t be repaired: replacement, cash offer, or something else?
• Are you registered with the Illinois Department of Insurance?

Be wary of unsolicited calls or mail that say your “warranty is expiring.” The FTC advises against relying on sales promises that aren’t in the written contract.

Keep repair costs down either way

Regular maintenance matters with or without a plan, and many contracts exclude failures caused by skipped maintenance. Our guides to heating and cooling, plumbing and furnace problems cover the basics.