Small business owners already have enough on their plate and don’t want any unnecessary stress added. Between managing employees, talking with customers, and planning for the future of your business, the last thing you want to worry about is an electrical issue or major appliance failure bringing everything to a halt. And while insurance is an important necessity, it doesn’t always cover everything. That’s why some business owners have turned to home warranties for extended peace of mind. But are home warranties always the best option for your small business? Let’s look at the costs associated with them, the advantages they provide, and what you should consider to make an informed decision.
Table of Contents
The Costs
The idea behind a home warranty is to limit the amount of unexpected costs for your business in the case of a failure. However, to mitigate that risk for the future, a home warranty requires payment on the front end via annual premiums. Similar to the way an insurance policy works, home warranties require payment now for added protection that will come in handy later.
Depending on where your business is located, the costs of a home warranty will vary. For those in the US, states in the northeast have higher average annual premium costs compared to those on the west coast like California and Washington. There are many variables that go into premium pricing, but states like Connecticut — which has the highest average annual premium costs in the US at $679 — tend to have older structures and much harsher weather. On the other hand, states like Washington on the west coast generally have newer buildings and much less severe weather so the average plan costs are less.
Besides location, it’s also important to factor in other fees when addressing the costs of a warranty. Remember to carefully consider the deductible that you’ll be pay out-of-pocket and the service fee that has to be paid for any services that do occur during your contract.
Lastly, you’ll need to consider what appliances or fixtures are worth purchasing a warranty on in the first place. If you’re purchasing a warranty on more than one item, even more savings can be had for bundling various warranties covering systems and appliances together.
The Benefits
Of course, buying a warranty comes with benefits that need to be weighed with the costs as well. With that annual premium being paid, warranty holders are protecting themselves from potential financial burdens in the future. For example, a small business operating in the south may run into an issue with their A/C unit during the middle of July.
Whether you’re operating a storefront with customers or a small office building, there’s not going to be much work getting done in 90 degree weather with no A/C. If you’ve purchased a warranty covering that unit, you’ll be in a much better position for repairs or replacement.
According to HomeAdvisor, the national average for A/C unit installation in the US is $5,425. If you purchased a plan covering your central air system, then even though you paid a higher annual premium, you’ll avoid a large necessary expense to keep business running smoothly.
The Bottom Line
When it comes to preparing for the future and insulating your business from unexpected expenses, owners have a lot of options to choose from. Home warranties can offer significant peace of mind for those concerned about major appliances and systems failing but may not always be the best option for everyone. While there are certainly some advantages that come with a warranty, make sure to consider the specifics like what the premium is, your deductible, what’s covered in your plan, and what the out-of-pocket costs would be without the warranty — that plan may not turn out to be what you hoped!
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