Homes operate as a complex network of systems and appliances. When everything works as it should, your home operates smoothly and you really don’t think about the complicated nature of everything that is going on behind walls. But when the shower won’t turn off or the furnace fails to provide heat, your world turns upside down. Not only are these failures inconvenient, they can be very costly to repair or replace.
Home warranties are not the same as homeowner’s insurance which cover against fire, theft and other hazards. Home warranties are basically a service contract that pays for the repair or replacement of certain components within your home that fail because of malfunction and normal wear and tear. Most basic warranties cover electrical, heating and duct work, plumbing, kitchen appliances (except refrigerators), and exhaust fans for a period of 1 year. The cost for a basic policy is $300 - $500 for a single family home, and slightly less for a condo. For an additional $100 - $250 per item, there is additional extended coverage available for AC, pools, refrigerators, washers and dryers and even roof leaks, among other items.
Whether you should buy coverage or not depends on a few factors. For instance, if you are purchasing a brand new home, the builder will provide at least a one-year warranty for home systems and appliances and generally ten years for structural issues. If your home comes with appliances, those will additionally have manufacturer’s warranties.
On the other hand, if you are purchasing a re-sale home it may be a good idea to purchase a warranty, or ask the seller to provide one as part of your negotiation. This could be especially important if you are a first-time buyer sinking all of your money into the down payment – you could end up in a precarious financial position if faced with an expensive repair in your first year of ownership. Often, your real estate agent will pay for the home warranty as a way to thank you for your business. A home warranty purchased by the seller before the house is even sold can be an attractive incentive to prospective buyers as the warranty will transfer to them upon closing.
Just like any contract, the key is to carefully read the information and be aware exactly what is covered and what is not. For instance, roots in a sewer line are not covered, nor are appliances that were installed incorrectly. Also, be aware that there will always be a service call fee of $50 - $75, and you cannot use the repair company of your choice. If you have an appliance or system failure and you think it will be covered, call your home warranty company right away before calling an outside technician or trying to repair it yourself as these actions might invalidate any claim you could otherwise make.
If you will be purchasing a warranty, or asking for one, it is wise to do some online research to explore the different warranties available; what they cover, exclusions, limitations, costs, and reviews from actual customers. Doing your homework before purchasing a home warranty could not only provide peace of mind, but save you money and headaches down the road.
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