what to do when it all falls down

[Twannisha Jackson]

any thoughts on home warranties? do you usually just have a contractor/handyman for everything? they say home warranties are a waste of money but they could save you money in the end? I get fixing it before it gets worse but what about when it just happens out of nowhere? thinking of buying a home warranty through my insurance. $60/month, 12-month contract.

[Kevin Sobilo]

@Twannisha Jackson, a purchased warranty is just a kind of "insurance". So, I think of it just as I would insurance.

Insurance companies make HUGE profits. So, that means the service they provide costs MUCH less than the customer pays! So, in the long run you will lose money not save money. It really is that simple.

However, why would people buy insurance or purchased warranties then? Well, any kind of "insurance" is appropriate when the customer cannot stand the loss. If your house burned down, almost nobody could have budgeted, saved, and prepared for that loss. So, insurance makes sense.

With a home warranty, if someone is brand new and has no reserves and a hot water heater replacement will cause them hardship where they start missing mortgage payments, THEN a home warranty could be a viable option. A safety net. Otherwise, for anyone with means they are MUCH better off budgeting and saving money knowing that these kinds of issues will eventually come up. By doing that budgeting and saving they will save themselves a nice chunk of money over time versus buying purchased warranties.