Help! I Extended My Home Warranty—Was That the Right Move?
A home warranty that comes with a home purchase is often limited to 1 year, but the homeowner can extend the policy or shop for a new one for continued financial protection.
Q: When I bought my home, it came with a 1-year home warranty. I haven’t really needed to use it, but some of the appliances are on the older side, so when I got the policy extension offer I paid for another year. I’m worried that I wasted my money: Is an extended home warranty necessary?
A: If your initial home warranty was wrapped into the purchase of your home, the actual cost of purchasing a year of home warranty coverage may have been surprising, but an extension of an existing home warranty provides you with the same level of home protection you’ve been experiencing since you bought the home. There’s nothing different about a home warranty extension—it’s just a continuation of coverage. Whether or not it was the right decision depends on a number of factors, including the age and condition of the systems and appliances in your home, the likelihood that you’ll need to make expensive repairs, the level of coverage you have, and the importance of the peace of mind that home warranties provide.
An extended home warranty is a home warranty you’ve renewed.
You can’t shop for an extended home warranty as an independent purchase. If you had an existing home warranty and renewed the policy, then you have an extended home warranty. There’s nothing different or special about it; there are no added features or extra coverage unless you opted to change the level of coverage or the appliances included. The exception is that some warranty companies will offer an incentive rate if you renew before your policy ends, as an encouragement to renew the policy rather than shop around for a new one. If you’ve already extended your policy, then you’re set for another year, but when you receive the renewal notice next year you’ll want to do some investigation of some of the other options available to you.
The extended home warranty covers everything that a regular home warranty does.
Unless you requested a change or were specifically notified, the coverage listed in your original policy will continue through the extended warranty. What is covered depends on what you (or the seller) originally selected, so you’ll need to look through that policy to see which systems and appliances are covered. In addition, the service charge will remain the same, unless you’re notified otherwise. The extended warranty provides the same coverage for repairs and replacement of covered systems and is subject to the same payout limits per event, per appliance, or in total as the original policy.
Consider the circumstances under which you chose to get a home warranty.
Going forward, you’ll want to consider the benefits your policy provides to you before choosing to extend the policy further. The first question you’ll want to answer is why you chose to get a warranty to begin with. Often new homeowners initially want protection from the cost of major repairs and replacements during the first year or two after a home purchase. This is a sensible choice: When you’ve just spent most of your savings on a down payment, the financial hit of a whole-house system failure can be enough to sink you deeply into debt or potentially render you unable to continue making payments on your mortgage. Therefore, the protection of the warranty is an important safeguard of your investment and provides peace of mind. Once you’ve restocked your emergency savings to a level where you could absorb routine maintenance and replacement of your home’s systems and appliances, however, you may prefer to cancel the warranty and invest the money you’d have spent on it in that emergency fund.
This can be especially true if the home is newer and the appliances and basic systems are still well within their lifespan. However, even if you have a solid savings cushion, older appliances and systems can be so expensive to repair or replace that the warranty might still be a good choice. If your original warranty purchase was because you were concerned that appliances and systems were older and that they might all fail around the same time, choosing to extend the warranty makes good financial sense, regardless of your financial situation. One truly significant repair can cover the annual cost of a warranty, and repairs beyond that are pure savings for you.
Consider whether or not you’ve used your home warranty to make repairs.
If you’ve already had your warranty for a year, take a look at how you’ve used it. For example, if the reason you chose to get the warranty was an older HVAC system and you have since used the warranty to replace it, you’ve gotten your money’s worth—but if all the other systems and appliances are in fine condition, you may choose not to extend the warranty. If you haven’t used the warranty, why? Hopefully the reason is that nothing broke down in your home or needed repair over the past year, but you want to assess whether or not you’ve used the warranty as much as you could have. Did you slip into the habit of fixing things yourself rather than making a warranty claim? If it turns out that you’re handy and can manage many repairs on your own (and prefer to), then the warranty extension isn’t a great plan for you.
On the other hand, if you just kept forgetting to use the warranty or aren’t sure why you didn’t, take another look at your policy. Call and speak to a customer service agent and ask them to walk you through your coverage. It may be that you could have used the warranty a number of times and didn’t, and the amount of money you spent on paying local repair companies may be sobering. If that’s the case, make certain you know when you can use your warranty, and then do so. When it comes time to renew your policy, you’ll know what it’s worth to you.
Finally, if you haven’t used the policy at all, look back at why you chose to get one in the first place. If it was to protect older systems and appliances, congratulations on making it through another year with them! But they’re still old—in fact, they’re even older now than they were when you purchased the policy, so continuing to carry coverage is a good call.
Consider what parts of your home warranty you want to change and what you want to keep.
Renewal time is an ideal moment to assess what you really want your coverage to look like. It’s an opportunity to renegotiate your contract—or to walk away and look at other companies. Renewal incentive discounts can be a great option, but if you’re not using parts of the policy, you’re still paying for coverage you don’t need. Perhaps you initially chose a policy that covered all of the whole-house systems and the kitchen and laundry appliances, but now your financial cushion is solid enough that you’re comfortable with replacing the appliances if they stop working. Your electrical and HVAC systems, however, are what keep you up at night. In that case, you might decide to drop the coverage of the appliances and just keep the systems coverage. Another consideration is the service charge. The best home warranty companies offer several rate options: You can pay a lower premium but incur higher service charges when you do make a call, or you can pay more up front and reduce the cost of the individual service calls. Maybe your needs have changed over the year. Initially, you may have found the lower premium attractive, but if you make a lot of service calls and those charges are mounting up, you may find it makes sense to switch to a higher premium that reduces the cost of each individual claim.
Did you add a spa or a pool to your yard? A sprinkler system? Maybe you invested in a basement refrigerator or an electric garage door opener. If that’s the case, you’ll need to consider adding those items to your policy, as they’re not usually covered in base plans. The best home warranty for your situation may not be a preset package, but one that is tailored to meet the needs of your particular home.
An appliance extended warranty is appropriate in certain situations.
Appliance repairs can be almost absurdly expensive. Between the parts and labor it can feel like replacement would be the cheaper option. Also, modern appliances are high-tech, which means there are many components that can fail unexpectedly and fall outside of the manufacturer’s warranty. Home warranties that include appliances cover the vast majority of repair calls, however, taking the sting out of calling for repairs, which may mean you call for that repair while the problem is still small. If the item can’t be repaired, the warranty will either cover or take a good chunk out of the cost of replacement, usually saving you considerably more than you paid for the policy. If your appliances are aging, extending the warranty coverage is kind of like having home appliance insurance that helps you keep your appliances healthy. If your initial policy only covered whole-house systems, another year of age and use might make renewal time the right time to add an appliance package to your existing warranty. Often, home warranty companies offer packages that combine the home system and appliance bundles into one policy that costs far less than purchasing the policies separately.
If you are unhappy with your current home warranty provider, shop around for the right fit for your needs.
If you’ve decided to extend your home warranty coverage, the next decision to make is whether you wish to stay with your current carrier or not. Once you’ve established the coverage level you need, you’ll want to shop around and compare the offerings of various companies. Check out home warranty reviews online, check with local real estate agents to see which companies their customers have been pleased with, and call to speak with customer service agents about their products and packages along with any promotions they might have running in your area. The best home warranty company for you may be the one you already have, but it doesn’t hurt to see if there’s another company that better fits your coverage needs and budget.