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Ask an Electrician: Are Home Warranties Worth it?

Updated Jan 10, 2023

Updated Jan 10, 2023

Home > Home Warranty > Ask an Electrician: Are Home Warranties Worth it?
Michael Allred

Michael Allred

Founder and Owner
Allred Electrical Services, Inc.
(336) 483-5508
House Method reached out to electrical expert Michael Allred of Allred Electrical Services, Inc. for his professional insight into the true value of home warranty coverage for common household electrical failures. Allred draws from his first-hand experience offering premier electrical services to homeowners in North and South Carolina since 1999.

Most home warranty plans offer substantial coverage for your home’s interior electrical system, but is the investment worth the probability and out-of-pocket cost of unexpected electrical issues? House Method sat down with Michael Allred — Founder and Owner of Allred Electrical Services, Inc. in Southport, North Carolina — who says home warranties are a smart way to stay one step ahead of electrical emergencies so long as you’re sure of what’s covered.

Q: In your professional opinion, is a home warranty worth it for household electrical systems?

A: “With the average home warranty being $600 or less a year, frankly, one electrical claim could cover that easily. The coverage would pay for itself. Two claims, most definitely,” Allred says.

“For interior electrical systems, in particular, I think it’s a good idea to have a home warranty in place. If it’s an older house, it’s an especially great idea. As for new homes, nowadays, everyone is trying to get things done quickly and cheaply, so you’ll find a lot of improper installations and jury-rigged wiring in newer construction as well.” 

Though the national average cost of a household electrical repair sits at around $318, larger projects like interior rewiring can knock you back $2,000 or more. Such high repair prices often leave homeowners feeling more inclined to hold off on an immediate fix. But, when left unresolved, certain electrical issues can pose significant safety risks and may lead to larger, more expensive secondary damage.

Q: What is the most common electrical issue that homeowners experience?

A: “The most common electrical issue I’ve seen is failed electrical outlets,” says Allred. A blown electrical outlet can be caused by several things but is most often due to faulty receptacles,  circuit overloads, improper installations, or exposed wiring. Homeowners should expect to pay anywhere from $80 to $200 per outlet for a proper repair.

Q: How many of the homeowners you’ve worked with have used a home warranty to cover electrical repairs?

A: “More and more people are signing up with home warranty companies. But here’s the thing —  many of them go into it blind, thinking: ‘well if it’s a warranty, that must mean anything that goes on with my electrical system is guaranteed to be covered.’ And that’s just not the case,” Allred says.

Inclusions and exclusions can vary significantly between home warranty companies, particularly for household electrical systems and the specific parts or components covered. Home warranties will only pay out for repairs related to normal wear and tear, so electrical damage caused by things like power surges, outages, or a DIY project gone wrong, won’t be covered by a provider.

Q: Do most electrical service companies typically offer their own warranties or guarantees?

A: “I offer a lifetime warranty on any job I do,” says Allred. ”Now, obviously, it’s a limited warranty, so instances already covered by home insurance — an act of God, a hurricane, lightning, or anything like that — we don’t cover. But other than that, we back our workmanship for the life of the property.”

Q: Can you describe the process of being compensated by a home warranty company from the technician’s point of view?

  1. First service appointment — “Once I accept the work order, I go to the customer’s house. First of all, there’s always a service fee that the home warranty asks us to collect. They prefer that we collect that payment as we greet the customer before we talk about any work. Personally, I don’t like to do business that way, so I’ll typically collect it at the end of the visit.”
  2. Diagnosis — “From there, I’ll go in, diagnose the problem, and explain what has to be done repair-wise to the customer. If it’s something minor that we can fix right then, we go ahead and fix it. If not, we have to go back to the home warranty company to get authorization. Then we’ll collect the service fee, and we’re done until the next appointment.” 
  3. Repair or replace — Typically, all a customer pays is their service fee. If the claim is approved, we do the work and then invoice the warranty company for the balance due. It typically takes five to six weeks to be compensated by the warranty company. In cases where the claim is denied by the home warranty, we have the opportunity to go in and offer the customer our service with our company.” 

Q: Are contractors paid fairly by home warranty companies?

A: “Our rates with home warranty companies are about half of what we charge the general public. That said, the work we do through home warranty companies is a very small part of our business. We primarily use it for filler work. The bulk of our business comes from local contractors, real estate brokers, and private homeowners that we provide recurring services to,”  Allred says.

When collaborating with a home warranty company, “the margins are very slim, and there’s not a lot of money to be made on the contractor’s side. But the referrals and marketing are helpful for us.” 

Q: Do you have any additional tips for maintaining a home’s electrical features?

A: “If it were me, I would probably have an electrical professional come in once a year to open up the main distribution panel and take a look and make sure everything is tight, clean, and not burned,” Allred says.

During a routine electrical inspection, an electrician will do a walk-through of your home to assess interior outlets, conduits, cable assemblies, and all electrical boxes. They’ll be keeping an eye out for any irregularities like:

  • Frayed wires
  • Improper wiring arrangements
  • Minor shorts and sparking
  • Evidence of overheating
  • Incorrect wire labeling
  • Surge protection
  • Water damage, corrosion, or mechanical issues around any electrical components
  • Any electrical code violations

Most home warranties will not cover the cost of damage related to poor routine maintenance. Some may even hold you accountable for annual tune-ups by requesting recent inspection records with any claim you file.  Once you’re enrolled in a policy, keeping your home’s electrical system in good shape will only maximize your future coverage potential.

An Electrical Expert’s Main Takeaways

  • A home warranty could pay for itself within one or two home electrical repairs per year.
  • Electrical coverage across different home warranty providers isn’t apples-to-apples. Some companies will cover certain electrical components, while others won’t,  so always review the coverage terms of a sample contract before purchasing a plan.
  • Many homeowners tend to automatically assume that a home warranty will cover their entire electrical system outright, which isn’t true.
  • From an electrician’s standpoint, the primary benefit of working through a home warranty provider is prospecting and marketing, not profit.
  • Routine inspections are the ultimate way to mitigate electrical issues around your home. All homeowners should prioritize professional maintenance at least once a year, even if no issues are apparent.

About the Ask an Expert Series

House Method’s Ask an Expert series directly connects our readers with the expert insight of certified home service professionals around the United States. Our research team led one-on-one interviews with each subject matter expert that appears on our site and asked them topical questions about the value of a home warranty as it relates to their field of work. Though all answers featured in this article include direct quotes, we’ve also integrated contextual information, relevant research findings, and verified resources to supplement each excerpt further.

For more information about our research and vetting process in the home warranty category, visit our full rating and review methodology.

Looking for more information on home warranty companies? Check out some of our other expert reviews to get all the details you need. Remember, each of these companies gives a free quote.

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