Is Home Appliance Warranty Insurance Worth It?

When you purchase a house or condo, there are some related expenses that become your responsibility. As a renter, you must keep the space you rent in good condition but issues related to the appliances and systems are not your responsibility.

Your home or condo contains appliances and systems that are your responsibility to maintain. At Addition Financial, our members sometimes ask us about whether it is worthwhile to purchase home appliance insurance. In this post, we’ll explain what home appliance warranty insurance covers, how much it costs and whether we believe it’s a good investment for homeowners.

What is Home Appliance Insurance?

When you buy a home appliance, it typically comes with a limited warranty that will cover the cost to repair or replace the appliance if it breaks. Home appliance insurance does something similar but with more flexibility.

Home appliance insurance may also be referred to as a home appliance warranty or home repair insurance, but all three names apply to the same product. As a homeowner, you have the option of adding coverage for your home’s systems or for appliances that may not be covered in a standard policy.

What Does Home Appliance Insurance Cover?

Home appliance insurance policies can cover both the appliances and systems in your home. To clarify, an appliance is a stand-alone object and a system is something that is spread throughout your home. Plumbing is an example of a system.

Let’s start with some appliances that can be covered by these policies:

Ceiling fan
Clothes washer
Clothes dryer
Cooktop
Dishwasher
Garage door opener
Garbage disposal
Microwave
Oven
Pool
Refrigerator
Spa
Sump pump
Water heater
Well pump

In addition to covering appliances, home appliance warranty insurance can also cover some of the systems that keep your home comfortable. These include the following:

Air conditioning system
Central vacuum
Ductwork
Electrical system
Heating system
Plumbing system
Septic system
Sprinkler system

In most cases, a standard policy will cover the basics and you can buy more inclusive policies to cover additional appliances and systems. Certain systems that are at a higher risk to develop problems or are expensive to repair or replace may be added as riders. Pools are a good example.

Does Homeowners Insurance Cover Appliances?

As a homeowner, you must buy homeowners insurance. Since homeowners insurance does cover damage to your personal belongings, you may wonder whether your homeowners policy will replace your appliances and systems in the same way that home appliance insurance would.

The answer is that your homeowners policy will cover damage to your appliances in certain circumstances. For example, if something caught on fire in your laundry room and damaged your washer and dryer, your homeowners insurance company would assess the damage and pay to either repair or replace those items.

However, if your washer stopped working due to routine wear and care, you would be out of luck with your homeowners policy because those policies do not cover replacement unless the appliance in question is damaged by a covered event. Wear and tear is not something that is covered by a homeowners policy.

The takeaway here is that home appliance insurance fills a gap left by homeowners insurance by providing coverage to repair or replace some of your most costly belongings if they stop working.

What is the Difference Between Home Appliance Insurance and a Warranty?

As we stated above, home appliance insurance may sometimes be referred to as a home appliance warranty or a home warranty. These terms all refer to the same thing. Let’s take a minute to talk about the other type of warranty, the manufacturer’s limited warranty.

Most major appliances and even small electronics come with a limited warranty. It may last for six months or a year. Major retailers such as Best Buy and Amazon usually offer their customers the opportunity to buy an extended warranty for up to three years, and even to renew the warranty at the end of the term.

Limited warranties are usually included in the purchase price. There may be limitations on repairs and replacement. It’s also worth noting that manufacturers include these warranties knowing that in most cases, customers won’t need them. It’s unlikely that your brand new refrigerator is going to die in less than a year.

By contrast, home appliance insurance remains in place even after you have owned your appliances for years and may be purchased to cover appliances that are already old. They can be useful for people who are living in a home with older appliances by providing some protection in the event those appliances need to be replaced.

What Should You Consider When Buying Home Appliance Insurance?

Now, let’s talk about some of the things to consider if you decide to buy a home appliance insurance policy.

Not all home appliance policies are created equal. Before you buy you should make sure to read the fine print, so that you understand what is covered and what is not. There may be limitations and restrictions on when and how you can file a claim.
Get multiple quotes. Any time you are in the market for an insurance policy, we recommend getting quotes and specimen policies from at least three carriers. Do your best to make an apples-to-apples comparison in terms of which appliances and systems are covered as well as your deductible and premium.
Which appliances do you need to cover? Some appliances are far more costly to replace than others. You might not care about insurance to replace a sump pump but want coverage to replace your refrigerator, stove and HVAC system.
How much can you afford to pay as a deductible? With any insurance policy, you should be sure that you can afford the out-of-pocket expenses without straining your budget. It’s important to reach a good compromise between a higher premium and a deductible you can afford.

The most important thing to remember is that you should always make sure that you understand the coverage you’re buying. The last thing you want is to pay for home appliance insurance only to learn that it doesn’t cover what you thought it did.

How Much Does Home Appliance Insurance Cost?

One of the biggest concerns for homeowners is staying within a reasonable monthly budget. With that in mind, let’s talk about how much it costs to purchase a home appliance insurance policy.

According to Consumer Affairs, the average cost for a comprehensive policy is about $60 per month or $720 per year. It is possible to get a policy for as little as $400 or to pay as much as $1,000.

It won’t surprise you to learn that the higher-priced policies usually cover more things. People who live in large homes or who want their systems covered will pay more than people who have only a few basic appliances to insure.

You will need to weigh the cost of home appliance insurance against the cost of needing to replace one or more major appliances in your home. To put that in perspective, let’s review some of the typical costs of major appliances:

A new refrigerator may cost between $350 and $4,000
A new stove/range may cost between $350 and $3,000
A new dishwasher may cost between $600 and $1,300
A new central AC unit may cost between $3,600 and $7,200

New appliances are less likely to stop working and may still be covered by the manufacturer’s warranty. However, if you have older appliances, the cost of home appliance insurance may be worthwhile.

Tips to Save on Home Appliance Insurance

There are a few things you can do to save money on your home appliance insurance if you decide to buy it:

Shop around. As we mentioned earlier, it’s always a good idea to get quotes from multiple carriers and compare coverage and exclusions, as well as premiums.
Decide what to cover. If you’ve just replaced your HVAC system, you may not need to pay extra to add it to your policy. It’s a good idea to track the ages of your appliances and systems. This link has valuable information about the lifespan of appliances.
Keep track of warranties. You may not need to add your fancy new refrigerator to your appliance policy now, but it may make sense to do so when the manufacturer’s warranty expires.
Bundle your policies. We say this in every post about insurance but it bears repeating. Insurance carriers want your business and many of us have policies with multiple carriers. Ask each carrier how much you can save by bundling policies – and then take the best offer!

For homeowners on a tight budget, the cost of replacing appliances and systems may be too much. You can use these pointers to find a home appliance policy that you can afford.

We believe that, for many homeowners, the cost of home appliance insurance is a worthwhile tradeoff for the stress of finding the money to replace expensive appliances when they stop working. The information we’ve included here will help you to decide whether to buy a policy and help you save money, too!

Are you ready to buy a new home? Addition Financial has competitive mortgages for every buyer. Click here to learn more.