Is It Worth Buying a Home Warranty? (Home Buyer’s Edition)

When I bought my home, it came with a home warranty—and thank goodness it did.

The house was over 100 years old. While it had been flipped and updated in many areas, my very first winter, the furnace gave out. The replacement? It technically cost me just $1,600 thanks to the warranty. Without it, I would’ve been looking at an $8,000–$12,000 bill. So yes, it saved me—but it still cost me.

So let’s clear something up right away: a home warranty isn’t really a warranty. It’s much more like health insurance—but for your house. And once you start viewing it that way, it becomes easier to understand what you’re really paying for.

What Home Warranties Have in Common with Health Insurance:

• Benefit maximums: Policies usually have yearly or lifetime payout caps.

• Cost-sharing: You’ll often split costs, much like copays or coinsurance.

• Service call fees: Most warranties charge $50–$100 per visit to dispatch a technician to diagnose the issue.

• “Non-covered” costs: You may owe extra for things like refrigerant for your A/C or code-required modifications.

• Coverage exclusions: Just like health insurance, what’s covered depends on your plan. Basic plans might exclude plumbing, pools, spas, or A/C systems; premium plans might include them—for a higher price.

So… Is a Home Warranty Worth It?

Maybe. It depends on the circumstances.

A home warranty makes sense if:

• The home is older

• The furnace, A/C, or water heater is approaching end-of-life

• Appliances are clearly aging

• The inspection flags concerns, but the items are still functional

In these cases, requesting a home warranty as a concession during negotiations can be a strategic ask. Sellers likely won’t discount the home just because a furnace is old—but they might agree to cover a $500–$1,000 warranty to keep the deal alive after the inspection.

And if they say no? You can always buy one yourself.

When a Home Warranty Probably Isn’t Worth It

If you're buying a new or recently built home with all new systems and appliances, a home warranty is likely a waste of money. Yes, appliances don’t last forever anymore—10 years is now considered good. But let’s break it down:

• Cost of home warranty: $500/year for basic plan

• Over 8 years: $500 × 8 = $4,000

Unless you’re buying high-end appliances, you could likely replace most of them outright for that amount. And even if your warranty covers replacements, you’ll likely still:

• Pay service fees

• Get limited options for replacements

• Be subject to fine print (and plenty of it)

An Alternative Approach: Self-Insure

Instead of paying for a home warranty, consider setting that same amount aside each month in a high-yield savings account.

Let’s say you deposit $42/month (roughly the cost of a basic warranty) into a savings account with a 3.8% APY compounded daily:

After 10 years, you’d have approximately $6,141.29 ($5,040 in contributions + $1,101.29 in interest)

That gives you a healthy home emergency fund—without the hassle of coverage limits, exclusions, or service call fees.

One Last Thing: Know When to Let Go

Even if a home warranty is a smart move early on, it’s not something to keep forever. If you’ve already used it to replace a major system or appliance, you may be reaching the point of diminishing returns.

At that point, it might be time to cancel and divert that money into a rainy-day fund instead.

Final Thoughts

A home warranty can be a lifesaver—or a wallet drainer. The key is understanding what it really is (a limited insurance policy), what it covers (and doesn’t), and whether your home’s age and condition justify the investment.

In the right situation, it’s a great safety net. In the wrong one, it’s just another monthly bill.