Home warranties: are they worth it?

[Brett Lee]

Curious what people's thoughts are on home warranties and whether they are worth it or not? We have heard very mixed reviews with some people saying that they are terrible and other people saying they're great. We had a decent experience with the home warranty years ago when our oven went out and they replaced it. I currently have a home warranty on our house that was included by the real estate agent when we bought it a year ago... Wondering what people's thoughts are on whether we should renew or not.

Our house is about 30 years old and still in the original furnace. Ideally if there were a company that a warranty would cover the roof then that would be a no-brainer so if anybody knows any leads for companies that will warranty a roof in addition to other housing components that would be great.

I appreciate any input you guys have! thanks :-)

[Kevin Sobilo]

@Brett Lee, think of a home warranty as just another type of insurance. Insurance companies make HUGE profits because they take in WAY WAY more than they pay out. So, in the long run people do NOT end up ahead buying insurance.

So, why do people buy insurance and when does it make sense?

Well, to my mind, it makes sense to buy insurance when the loss covered is something you cannot handle or would cause you a significant hardship. For example, the house burning down. That is a rare happening, but its hard for most anyone to be prepared to cope with it.

With a home warranty, if you are budgeting money for cap ex and maintenance you should end up way ahead in the long run skipping a home warranty. However, if you are just starting out and could not handle maintenance issues the first year or two a warranty could make sense, but for the vast majority of people they won't make sense as long as they work and plan and budget to handle those issues. Doing those things and skipping home warranties will put more money in your pocket in the long term.