Optimal Finance Daily - Financial Independence and Money Advice 3411: Are Home Warranties Worth It? by Mike Ballew of EggStack on Evaluating Home Coverage
Jan 4, 2026
Home warranties might seem tempting, but they're often overpriced for predictable repairs. They’re seen as a safety net when, in reality, they function more like forced savings for those lacking discipline. Good insurance covers rare catastrophes, not routine maintenance. Instead of relying on warranty companies that limit payouts, saving strategically is a better alternative. Learn how insurers profit by collecting more in premiums than they pay out. It's time to consider self-insurance and sock away funds for home upkeep!
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When Insurance Actually Makes Sense
- Insurance works well for low-probability, high-cost disasters but poorly for high-probability, low-cost failures.
- Home warranties fall into the latter category and therefore make little financial sense.
Warranties Versus Predictable Costs
- Home warranties are costly relative to the benefits because they cover predictable wear-and-tear.
- Saving the equivalent premium yourself typically yields more value than buying a warranty.
Predictability Undermines Insurance Value
- Many home systems and appliances have well-documented useful lives, making failures predictable.
- You don't need insurance for events that are essentially certain over time.