QUESTION: A listener asks what Dave thinks about buying a home warranty each year versus setting money aside each year.
ANSWER: Home warranty companies sell warranties for $450 a year. If the warranty company has to pay out more than $450 to each homeowner in a year, they’ll go broke. Statistically less than 25% of the money goes toward home repairs – most of it goes toward profit and marketing.
You’re much better off to put the money aside and have an emergency fund of 3-6 months of expenses.
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