<prompt> Human: So my wife and I bought our first home about two months ago. The seller included a one-year home warranty in the deal, which covers all major systems and appliances. Ill have the option to renew the warranty after the year is up, but I hadnt put much thought yet into whether or not I should. I think its around 500 a year, and has a 100 deductible. Does anyone have experience or thoughts on this? If you want more specific details Id have to pull up the paperwork, but as I recall, all the major systems and appliances were replaced within the past five years or so, so I wouldnt expect anything major to go wrong in the very near future.---The reason I bring it up today is because I woke up this morning to find that the water heater burst and flooded the basement which we just had carpeted a week ago. So much for expectations, huh? Fortunately we have the home warranty, which will cover the cost of replacing the water heater, and homeowners insurance with optional backup and overflow coverage which will hopefully cover the water damage and cleanup I think, the adjuster isnt coming out until tomorrow. I saw a post recently by someone who said, Why should I have an emergency fund? and one of their reasons for eschewing saving was that they have good insurance. Well, I thought that between the warranty and homeowners insurance, Im pretty well covered, especially since all the appliances are less than five years old, but so far here are the out of pocket expenses Im currently aware of: 50 service charge to our plumber. As soon as we noticed the water, my wife called the plumber her parents have used in the past. They came right out and started assessing the damage. In the meantime, I dug up the paperwork for the Home Warranty and called to file a claim. They informed me that its only covered if one of their in-network plumbers does the work understandable and unfortunately the one we called isnt in their network. So I had to tell our plumber to stop working and that I wouldnt be able to hire him to replace the water heater. But he had already responded to our early-morning call and started to work, so we paid him 50 for his troubles. Granted this was avoidable but first thing in the morning when you find a flooded basement with water gushing out of the utility room, calling the plumber was the first thing we thought to do. 50 lesson learned. 100 deductible under the Home Warranty to the new in-network plumber for any work he does. 75 charge for a building permit to have the water heater replaced. The actual cost of the permit will be determined by the final cost of the work, but Im told that its a minimum charge of 75. Im not sure if I can roll this into the charges covered by the warranty, but at the moment Im assuming I cant. 100-150 charge to remove the old water heater. In looking over the documents, I dont believe that removal is covered by the home warranty. The new plumber said hed take it away for 150. I can hang onto it until the town does their special pickup, but thats not until the spring, and theres like a 95 charge for that anyway. I drive a sedan and dont know of anywhere I could dump it myself anyway, so Im leaning towards just paying the 150 to get it out of my house. 250 deductible under my homeowners policy I think, though potentially as much as 1000, depending on what part of the policy this is covered under. Im hoping that were covered for any damage done by the water. In reading over my policy documents I think we are, but until the adjuster is here and the claim is approved, you never know. My main concern is that we just had new padding and carpets installed a week ago, which was sort of expensive, and its absolutely soaked. I need everything dried out, I want new padding installed and depending on the condition of the carpet, that replaced as well. If I can get this done for a 250 deductible thats fine, but it might be 1000, and if for some reason the claim is denied Im going to be facing an even bigger bill. And I dont know if the water did any other damage, so far my main concern has been the nice new carpeting.So within hours of waking up this morning, Im looking at a minimum of like 625 out of pocket. It will likely end up being much more than that when its all said and done. I also had to take the day off of work at least one - this isnt really costing me anything, but for many people it would mean lost income. And this is for an emergency for which I think we were pretty well prepared, considering the warranty and insurance coverage. Thankfully Ive got plenty in the houseemergency fund for just such an occasion. Thats why everyone needs an emergency fund, no matter how much other protection you have or how little you think youre exposed to risk. Its easy to budget for things you can expect. The emergency savings is for the things you dont expect - and there will always be something you dont expect.Assistant: Theyre not worth it. As a one off instance they may work out, but in general they dont. Otherwise the company offering the warranty wouldnt make any money and would go out of business. So lets say it costs you 1200, twice what youre at now. That would mean you would need to have something break every other year roughly for you to come out ahead. Do you think that will happen? Also as you said it doesnt cover removal, and I doubt it covers your homeowners deductible. So how much are they really paying. Human: I dont disagree with your overall point, but this: Otherwise the company offering the warranty wouldnt make any money and would go out of business.doesnt seem like a valid reason to not get it. I mean, health and auto insurers make money, yet most people agree its prudent to carry health and auto insurance. Besides, this time it was a 1,000 repair, but what if three years from now the HVAC goes and its 7,000? It is kind of nice to have that peace of mind that everythings covered. Then again, I can just dump the cost of the warranty into a separate savings fund annually, so Ill just have the cash on hand for when these things pop up.I realize it might not be a great financial decision. I think my judgment is being clouded a bit by the fact that Ive only been in the house for a few weeks and already the warranty saved me from an expensive repair. Its basically 10 a week insurance that covers all my major appliances and systems AC, heating, electrical, plumbing, water heater, oven, fridge, dishwasher, washer and dryer, garage door opener, etc. Whether or not it makes sense to extend the warranty is something Ill have to think about, but I can say that when I saw the flooded basement but before I assessed the cause or the damage, it was an immense relief to know that whatever it was, I was probably protected from any major expenses.Is it worth paying smaller, fixed expenses to avoid large sporadic ones? Maybe not from a strictly financial perspective, but Im only human. I spend money on things all the time that dont represent value in a strictly financial sense.  <response>: Research has shown that insurance and that is basically what the warranty is is most worthwhile as a hedge for events that have a low probability of occurring while being hugely expensive when they do occur.Since the home warranty covers relatively inexpensive repairs e.g. compare a hot water tank replacement to rebuilding a home in the event of a fire that have a relatively high frequency of occurrence, home warranties do not make sense.By comparison, life insurance covers a relatively rare event dying well before your life expectancy that will have devastating financial consequences for those that depend on you. 