When you purchase a home, one of the first things you will want to consider is whether or not you want to get a home warranty.
A home warranty is a contract that covers basic repairs and replacements of your home’s appliances and systems and it can be a great way to avoid major expenses that come with home ownership.
Read on to find out more about home warranties and whether this investment is right for you.
What’s Covered Under a Home Warranty?
A home warranty typically covers most components of large home systems such as plumbing and electrical systems, hot water heaters and HVAC systems. It may also cover large appliances like washers, dryers, refrigerators and stoves. Some plans allow you to add on coverage for spas, second refrigerators, pools, pumps and other appliances and systems you may have around your home.
Here is a list of things that are commonly covered by home warranties:
- Air conditioning systems
- Heating systems
- Washers and dryers
- Kitchen appliances
- Plumbing systems
- Ductwork to code
- Garbage disposals
- Ceiling fans
- Electrical systems
- Ranges and ovens
- Roofing (as long as the source of damage is not excluded by your policy)
Here is a list of things that may not be covered:
- Outdoor items like sprinklers
- Faucet repairs
- Spas and pools (unless additional coverage is requested)
- Permit fees
- Items broken before closing
How Does a Home Warranty Work?
If you have a home warranty, here is a rundown of the process that takes place if an appliance or system that is covered breaks down.
- The homeowner calls the home warranty company.
- The home warranty company calls a provider that is skilled in providing the appropriate service.
- The provider gets in touch with the homeowner to make an appointment.
- After the repair is completed, the home warranty company pays the provider.
- The homeowner will be responsible for paying a small service fee to the provider which usually ranges from $75 to $150. The service fee is a set price that is agreed upon when the insurance policy is set up.
How Much Does a Home Warranty Cost?
Home warranties can be quite expensive. They can range from $350 and $600 a year depending on what’s included.
Policies are typically prepaid for a year and renewed on an annual basis.
Are Home Warranties Worth It?
In general, the answer to this question is yes. While months can go buy without incurring any sort of major repair, something can suddenly come up that can run homeowners hundreds of thousands of dollars. In these circumstances, home warranties will more than pay for themselves.
However, there are some instances when home warranties are not advisable.
For instance, if you bought a newly constructed home, many of the items and systems in your home may be under warranty by the contractor. The appliances you buy may also have their own warranties. In these circumstances, you may want to wait until your warranties expire before you invest in a home warranty.
There are also some drawbacks of home warranties. Here are some things you will want to consider.
- Home warranty companies impose a dollar limit on the repairs you get each year. These will vary from company to company, but it is something you will want to investigate before signing on the dotted line.
- Home warranty companies can refuse to pay for repairs claiming that items were not maintained properly. Homeowners will have to present a record of proper maintenance to dispute these claims which may be difficult to do, especially if they are new owners.
- If an appliance needs to be replaced, in most cases the warranty company will choose the make and model of the new appliance. The homeowner will not have a say in the appliance they end up with.
- Under certain circumstances, coverage will not be provided. For instance, if an appliance breaks down due to a power surge, it may not be covered.
- Home warranty companies can deny coverage for various reasons and the homeowner may not agree.
If a home warranty company denies you coverage and you don’t agree with their decision, your real estate agent may have some leverage. He or she may be able to find a good resolution if they have a good relationship with the insurance provider.
Can a Home Warranty Help Sell a Home?
Often a seller will include a home warranty when they are selling a home. If the warranty is paid off through the year, it will save the buyer a bit of money. It also lets the buyer know the house was kept in good condition and it saves them the trouble of finding a new company when they take over ownership.
The policy can be transferred to the buyer’s name so they can take over payments when the current insurance period expires.
Home warranties aren’t perfect, but they are a great way to get homeowners out of costly repairs that may arise. It is best for buyers to budget for this expense when they are looking for a new home.