Do You Really Need A Home Warranty?

MINNEAPOLIS (WCCO) -- When you buy a home, you are likely to hear the words "home warranty."

But what is a home warranty? And do you really need one? WCCO found 4 things to ask before you invest in one.

Rich and Monica Gray were ecstatic to become new home owners.

"We fell in love with this house right way," Rich said. "We saw the trees, we saw the wood paneling inside the house, and just a lot of character there."

They bought an older house and the sellers threw in a home warranty to sweeten the deal.

The coverage varies, but a home warranty typically covers the repair or replacement of systems and appliances, like heating and air, washer dryer or refrigerator.

"In an older home I definitely feel it's an advantage," Monica said. "We didn't know how old the water heater was."

They worried something could go wrong, especially since their finances were tighter after purchasing the home

And then the water heater went out within three months of them moving in.

When used, the home warranty company dispatches a repair person and the home owner is responsible for a co-payment.

"It was a wake-up call, and luckily that warranty was on what we needed because we had some, you know, water coming in that we didn't know what we're supposed to do," Rich said. "We didn't have the money to put a brand-new water heater in."

Realtors recommend getting a home warranty, which is often offered during a home sale, like in the Grays' case

Consumer Reports suggests questions to first ask if you are going to purchase one on your own home:

• How much does it cost initially and for the co-payment?
• What does the warranty cover?
• Will an item be repaired or replaced?
• Is there a limit on how much the plan with pay?

"We really recommend that people do their homework if they want to buy one of these plans," said Senior Money Editor Anthony Giorgianni. "Find out exactly what is covered and more important what is not covered."

Giorgianni says appliances in a new home may already be covered by the manufacturer warranty, and some credit cards double the time frame.

Overall, he recommends skipping the home warranty.

"They can have lots of little gotchas. We think it's far better to take the money that you would spend on plans like this, put it in the bank and sort of self-insure," Rich said. "That is not a replacement for a good inspection of the home. You know, you really need to check out what you're buying."

The Grays are happy with what their home warranty covered. They now have a similar plan that covers specific home systems.

"If you don't know how old your appliances are, unless you've got all that money just stacked away, there's a reassurance," Monica said. "It's a nice added bonus, you know, when you purchase a home to have that."