Whether you are buying a home, listing your home to sell, or just looking for some extra protection on your current home, you have the opportunity to purchase a home warranty. A home warranty is not the same as an insurance policy but it does offer valuable protection of your finances as well as peace of mind. Insurance covers the house as a whole, whereas a home warranty typically covers the specifics like appliances, electrical, plumbing, and HVAC. Since there’s an annual premium to purchase the warranty as well as deductibles and fees to utilize the services, it’s important to consider whether or not a home warranty is right for you.
Most home warranty discussions take place during the sale of a home. The typical cost for basic coverage is anywhere between $350-500. Most warranty companies also offer add-ons and upgrades for additional costs. For sellers, you often can begin coverage for FREE and only pay at closing; however, most service calls carry a fee ($50-$100) and there may be other deductibles along the way as well.
Some sellers will market a property that includes the transferable home warranty as a sales incentive. Some buyers may negotiate into the contract that the Seller pays for a home warranty. Other buyers may choose to purchase coverage on their own. The cost of a home warranty is an extra expense beyond your insurance coverage.
Beyond the cost of the warranty premium and fees, it’s important to evaluate what the warranty actually covers. Some may not cover the refrigerator. Others may charge extra to cover the air conditioner units. There could be limits on what the warranty will pay towards a total replacement on some of the larger items. Keep in mind that repairs may be limited to specific part(s)/item(s) that are defective, even if the whole appliance is at the end of it’s life.
An older home, or a home with older appliances, is an especially good candidate for the protection of a warranty. Professionals in the business can help you discern the age and the life expectancy of most major items. An inspector will help evaluate and affirm the current working condition which will be important down the road. Some warranties may not cover the repair of an item if it can be deemed as a pre-existing defect.
Although a home warranty costs a little, it has the potential of saving you hundreds or thousands of dollars. Most buyers allocate a majority of their funds to down payments, closing costs, or other immediate needs. A large and unexpected expense within the first year of ownership could be devastating. The major advantage of a warranty is the peace of mind that your finances will be protected.
Sometimes people have a wealth of friends, referrals, or connections to contractors to repair anything that goes awry. Know that those handymen may not be eligible to help fix or diagnose your problem through the home warranty service call. Typically, the warranty company outsources to their own specific set of contractors to conduct the repairs and service calls. For those who are not handy themselves and don’t know those who are, this is a terrific benefit of home warranty coverage.
A home warranty has the potential to save you money, protect your budget, and give you peace of mind. Reading the terms and conditions carefully will help you evaluate the value of the added cost. Knowing yourself and your abilities to maintain a home, your personality type, your ability to save money into a rainy day fund, and your network of connections to licensed professionals are also important factors to consider when deciding if a home warranty is right for you.
