When you purchase a home, you have to deal with a lot, so when someone mentions the possibility of home warranties cover, you might feel confused.
You already have to purchase homeowners insurance; why would you need the extra protection of a warranty for your systems and appliances?
Home warranty doesn’t actually cover your home
The fact is home warranties don’t actually cover your home. Instead, it covers the major appliances within the home, such as you’re heating system and cooling system, refrigerator, range, dishwasher, and washer and dryer.
If something goes on the fritz within a certain period of time after you’ve moved in, home warranties will cover the repairs and/or replacement of these appliances.
For some, a home warranty can be a huge blessing, but it represents a completely unnecessary expense for others.
When you’re planning to buy a home, here are some of the basic issues relating to a home warranty.
1. The Age and Quality of the Appliances
If it’s possible, try to find out the age of the appliances before you buy the house.
If the appliances were purchased within the past year, a home warranty is probably unnecessary, because the appliances will still be under their manufacturer’s warranty.
You’re also not likely to experience problems with high-quality appliances that have been installed within the last five years or so.
If they are of excellent quality, they might well last 20 years or more without a major problem.
If the appliances are older and lower quality, however, you might appreciate the protection of a home warranty.
Low-quality appliances tend to demand maintenance and repair more often, and they won’t last as long.
If you suspect you might need to replace some of the appliances soon, a home warranty can be an inexpensive way to do it.
“During your home buying experience, you’ll likely have a home inspection done to determine the efficacy of all the working parts of your house,” says Ray Boss Jr., contributor to US News.
“Use this as a guide to select which items will need coverage above and beyond the basic parameters of the home warranty.”
2. Home Warranty vs. Savings
Insurance and warranty plans earn their money because homeowners often pay more in premiums than they do for repairs. For non-essential homeowners insurance options like a home warranty, ask yourself: Will I really save money by purchasing a home warranty from home warranty companies?
“Consumer Reports has long recommended that consumers put the money they would otherwise spend on a home warranty or a service requests contract into a savings account dedicated to product repair and replacement,” says Anthony Giorgianni, contributor for the publication.
“That way, you won’t risk paying for a plan that may not provide the coverage you expect.”
Cost for repairs or replacement
Do a little research and calculate the potential cost for repairs or replacement for each appliance.
You might find you’re paying a lot more for a warranty than you would for that.
Keep in mind that you can’t know for sure what the future may hold, so if you prefer the peace of mind, a home warranty from reputed home warranty companies might be worthwhile.
3. Your Deductible
Most home warranty plans come with a deductible attached, so even if the claim will cover the majority of a repair, you could end up paying something like $50-$125 for each claim you file.
If the repairs are minor, you might pay more through your co-pay and deductible than it would cost to buy the part and fix the problem.
4. Negotiate at Closing
You might not have to pay for a home warranty at all if you can negotiate it into your closing deal.
One year of home warranty insurance
Many homebuyers will ask that the seller purchase at least one year of home warranty insurance so you’re covered if something breaks while you’re settling into your new home and appliances.
This is a great option for new homeowners because it allows them time to get to know the quirks and requirements of their appliances before they have to decide whether they’d like to continue paying the premium for a home warranty.
5. Convenience and Peace of Mind
Homebuyers often purchase a home warranty simply for the convenience and peace of mind.
If something breaks, you won’t have to pay more than the deductible to fix it.
Protection of the home warranty
Even if nothing breaks during the first year, many homeowners say the lack of stress due to the protection of their home warranty was worth the cost.
“Home warranties allow you to do much more than sleep well,” says Mr. Boss of U.S. News.
Unexpected financial burden
“Buyers will often find themselves worried over the sudden loss of a financial cushion after settlement. For the small price of a home warranty, you can not only rebuild your financial stores without the threat of an unexpected financial burden from your new home, but effectively budget for making any necessary changes on your own schedule in the future.”
In addition, you don’t have to worry about shopping repair contractors, finding parts, or dodging scammers to get the repairs done.
Home warranty organizations work only with certified contractors, so they’ll send people to handle your problem quickly and easily.
6. Check Your Homeowner’s Insurance Policy
“If you’ve known for a while that certain appliances were about to kick the bucket — and then they do — there’s a good chance you’ll be responsible for covering the repair or replacement costs,” according to an article from Esurance.
“That’s because the vast majority of home insurers won’t cover normal wear and tear or any negligence on your behalf. Keeping your appliances well-maintained is typically considered your responsibility as a homeowner.”
Not all home insurance policies are created equal
On the other hand, not all home insurance policies are created equal. Although it’s uncommon, some policies will cover your appliances if they break. Also, most policies will cover your appliances if they get damaged during a natural event, such as flooding, a fire, or a lightning strike, but not all will.
Check your coverage options to make sure you’re not double covering.
7. Check the Policy Details
Be aware of exactly what is covered if you get a home warranty, including the length of time you’ll be covered. The specifics will vary depending on your policy and the company, but most home warranty policies will cover the basics of your heating system and cooling system, appliances, electrical, water heater, and plumbing.
Most home insurance policies last for a year after you purchase the home, but some may run longer.
Contingency that goes with your policy
Understand every contingency that goes with your policy, so you’re not faced with an unexpected bill during an emergency.
Depending on your situation, you might add on extra service request, such as a well system or comprehensive coverage for some of your older appliances. If an emergency occurs, you’ll be glad you did!
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