When you purchase a home, even a home that is not new, there is a good chance you will be offered a home warranty. You may get lucky with a seller that offers to purchase one on your behalf to provide peace of mind that if any part of the home that fails will be fixed affordably. If not, you will likely receive numerous mail solicitations to purchase a home warranty once you have closed.
A home warranty is a contract between the homeowner and the warranty company that provides discounted repair and replacement service on the home’s major components, such as the air conditioning, furnace, plumbing and electrical systems. It may also cover appliances such as washers and dryers and refrigerators. Most plans have a basic option that provides all homeowners who purchase a policy with certain coverages. For any additional coverage, homeowners can purchase more components.
A seller may provide a home warranty as an indication that the home they are offering is in good condition.
Home warranties are a great form of financial protection against expensive, unforeseen repairs. But all policies don’t cover every component of your home and require cash up front, even if you never use it.
If you are considering a home warranty, check these items before you purchase one so you get the most out of it:
- Review your policy
Just like a warranty on a new electronic or car, home warranties cover only certain components of your home for a certain length of time depending on the plan you purchase.
Don’t assume your policy will cover ever appliance and system in your home because it doesn’t. Take plenty of time to go over your plan carefully so you don’t think something is covered when it’s not.
A warranty may cover water, plumbing electrical systems, bath tub, oven, dishwasher, garbage disposal, garage door and ceiling fans. But that doesn’t mean it covers your dryer if the dials fall out of it.
- Policies are for a specific length of time
Usually, a home warranty is written in one year increments. But it can be renewed. However you may not receive a notice of your policy coming to an end soon, so be sure to pay attention to the time frame of when you purchased the policy.
- Don’t treat it like insurance
Why? Because it’s not!
If, heaven forbid, some of your appliances get scrapped in a fire or flood or get snagged by a thief don’t expect a check in the mail to recoup your losses.
Warranties don’t operate like regular insurance policies. And most of them don’t cover things that are worn out from use, improperly installed or had preexisting problems such as manufacturer defect.
A basic coverage plan starts at about $300 and can go up to $600 for a more comprehensive plan. The homeowner can add extras if needed, such as coverage for a swimming pool or external well.
Although companies will offer home warranties to homeowners at any time, the best deals can be snagged if purchased at the same time you buy the home. The warranty offered at the time of the closing transaction typically offer the most comprehensive coverage and price points so that is why it’s a good time to lock in.
- Check licensing
Check with your state’s department of insurance to make sure the policy you are getting is properly licensed.
Consumer Affairs and the BBB both provide reviews and ratings of home warranty companies.
- Get comfortable with contractors
Let’s say your air conditioning goes out. What do you do? You will pick up the phone and call the home warranty company. And what do they do?
They will send out a subcontractor.
That’s right. Home warranty companies rely on contractors to do the work, meaning you will not be familiar with the individual coming out to do work on your appliance.
- Keep budgeting your money
Yes, your policy should help avoid costly repairs but it doesn’t mean you won’t shell out any more cash. Policyholders will need to pay a service fee.
- Weigh the benefits
Is paying for a warranty to fix your dishwasher every time it breaks worth hassle? The choice is up to you but the new one may run cheaper and better than what you had before.
And depending on your ability to do work on your own, having this policy will eliminate you having to break your back each time for a broken appliance.
- Keep your eye on the prize
Purchasing a home warranty to coincide with the sale of your home could make your house more attractive buyers because it gives them an extended sense of comfort for those buyers that may not have cash to immediately start building a home repair fund.
A study done in 2014 by the Service Contract Industry Council, showed on average homes sell 11 days sooner and for $2,300 than homes without home warranties.
Benefits for home buyers and sellers
After you take the time to review an affordable plan and rules and regulations it is a good idea to not shy away from the idea of home warranties. They benefit home buyers by providing reassurance that they can movie in without worrying about paying more for surprise repairs.
Home warranties can benefit home sellers (if they don’t already have it), since it covers those repair elements during the listing period. Some warranty companies even offer free seller’s coverage during this time with the hope that the buyer will want to continue with the coverage.
In general, the older the home, the more likely it is for things to break which makes perfect sense to get a home warranty. But best of all, many companies don’t differentiate between new and older homes in terms of cost, making the warranty a cost-effective option if you purchasing an older home.
We all enjoying having peace of mind, and there’s no doubt a home warranty can offer you that. But do your part and know what exactly what you’re getting yourself into, and if paying a policy is in your budget, it makes sense!