3411: Are Home Warranties Worth It? by Mike Ballew of EggStack on Evaluating Home Coverage

What It Covers

Mike Ballew argues home warranties costing $300-$900 monthly are bad insurance because they cover predictable appliance failures rather than catastrophic events like homeowners insurance does.

Key Questions Answered

• •Good vs Bad Insurance: Good insurance costs little and covers unlikely catastrophes (homeowners insurance averages $100 monthly for total home value). Bad insurance costs more and covers predictable events with limited payouts and numerous exclusions.
• •Self-Insurance Strategy: Set aside the equivalent of home warranty premiums monthly to build your own appliance replacement fund. You keep money that would otherwise cover insurance company advertising, salaries, and overhead costs while maintaining full control.
• •Insurance Company Economics: Insurance companies must collect more in premiums than they pay in claims to cover business expenses and profit. For predictable appliance wear, you're better off banking that premium difference yourself.