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Modern gadgets and appliances make our lives so much nicer. It’s no wonder we go above and beyond to get the best of them. Saving money, doing extra hours at work, and taking out credits just to afford those hi-tech pieces that will provide comfort, security, and many other things. Those technological wonders do not come cheap, but few people think about how much they can actually cost you beyond buying. Home warranties are services that are designed to help you stop worrying about those extra costs. And they are good at it because a good plan will cover you in case any of those precious items break down. But to really benefit from it, you need to know what exactly constitutes a “good plan”.
How Much Money Can You Save with a Home Warranty?
To understand if a home warranty can help you save money you should do some simple calculations. First of all, you should know that the average cost of a home warranty plan is between $400 and $600 a year, depending on the coverage. This means you’ll need to pay about $35-50 a month. Add to that a service call fee ($50-100 depending on the provider), which you’ll need to pay every time you need to call in contractors for repairs.
That doesn’t seem like too much money, but it’s nothing to scoff at either. So, the important thing is to understand how much it will cost you to NOT have a warranty.
The average cost of home appliance repair in the US is $104-238. Compared to the cost of a home warranty, it might seem that paying for repairs is actually cheaper. But this is where you need to remember that “average” is a very approximate measurement of cost, especially for things that have extreme differences between the “average low” and “average high”.
For example, doing some minor work on the fridge costs under $100. However, fixing some of the common problems with the fridge will most likely cost you about $400. Washers and dryers run even higher in the repair costs, and those are among the appliances that break down most often. Moreover, they often need to have some parts replaced. This will increase the total cost and you might also have to pay technicians by the hour.
Now, think about the fact that the main advantage of decent home warranties is that they cover home systems as well as appliances. This means you might be covered for repair costs not only for your fridge, oven, washer, dryer, and some other essential tech comforts, but also plumbing, heating, and electrical. Fixing those can be much more expensive. For example, the average cost of minor electrical jobs is $280, but the major ones start at $2,000.
A home warranty plan will pay for the repairs, which means your savings can be very substantial. To calculate the approximate amount of money you can save, you should:
- Assess all essential appliances and systems in your home.
How many of them are no longer covered with a manufacturer’s warranty? How many of them are at the risk of breaking down (check out the average lifespan for every device and factor in the wear and tear from your use of it). Do a similar assessment for home systems. The ones on the final list are your “at-risk” systems and appliances. - Research the most common types of breakdowns and average repair costs for them.
Do this for every item on the “at-risk” list. - Remember that even newer appliances might break down and you’ll have to pay for them if they aren’t covered with the manufacturer’s warranty.
- Add all of your potential expenses caused by home appliance or system breakdowns.
- Subtract the cost of a home warranty plan.
With that done, do you still think that it’s cheaper for you to pay for repairs than to buy a home warranty?
It will be true for some people and if you are one of them, it’s great! Set up an emergency fund for repairs and remember that over 60% of Americans can’t come up with $1,000 in an emergency. Do your best to make sure you aren’t one of them.
But if the calculations show that a home warranty is a reasonable investment, go for it. But before you buy the first plan that seems nice, remember that the home warranty industry is full of frauds. There are many court cases against these companies to prove this.
Therefore, in order to avoid wasting your money or being outright scammed, you need to choose a home warranty provider with extreme care.
What to Look for in a Trustworthy Home Warranty Provider?
Home warranty providers are many, but very few of them have a good reputation. That’s what you should be looking at first. You should read up various reviews and testimonials about the company. Surf through consumer portals, including Yelp and Google Reviews. Then, take a look at professional reviews that are offered by independent websites.
Next, run a simple Google search of the company. This will allow you to learn if it’s mixed up in any major scandals. Do not tie your search to your location as the majority of providers cover multiple states. Therefore, search nation-wide to see if the company is honest with people all over the country.
Finally, check the company’s profile at the Better Business Bureau website. A trustworthy home warranty provider would be accredited and have a rating of B and higher. You can also see how the company deals with customer complaints by studying them through the BBB.
When you shortlist trustworthy providers, take a look at their plans and terms and conditions. A good home warranty plan should have:
- High coverage limit (maximum amount of money the warranty company would pay for repairs)
- Reasonable time limits and requirements for filing claims
- No hidden fees or clauses that will help the company to deny your claim
Take your time studying every plan (and fine print!) in detail and comparing them. Buy only a plan that offers maximum coverage for your specific needs and the best possible terms. Top providers offer similar prices, so this shouldn’t be a big factor in your decision.
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