When you buy a home you usually see it once or twice before it becomes yours. Wouldn’t it be nice to not have to worry about surprises when it comes to the systems and appliances in your home? Products will inevitably break down over time, but many homeowners are not prepared for it. A home warranty is one option that can offer some financial protection for these types of sticky situations.
What is a Home Warranty?
A home warranty is a policy that protects features and systems in your home. A warranty will help cover the repair or replacement of damaged products. These products can include major systems (HVAC, Plumbing, Electrical), appliances, and more.
There are many types of home warranty coverages to choose from. For example, a one-year warranty can be anywhere from $300 to $600 and up, according to Realtor.com. Prices can vary based on items you choose to cover. In real estate negotiations, a seller may offer a home warranty as an incentive, or a buyer may ask for the seller to provide one. This especially happens if the major components are more than five years old.
If you are a first-time homeowner, I would recommend purchasing or asking the seller to provide a home warranty for at least the first year. If you are handy or mindful of your spending, you may want to forgo the warranty.
Home Warranty vs Homeowners Insurance
You may ask yourself, why would you need a home warranty if you have homeowners insurance? The answer is that these cover very different things. Homeowners insurance covers damage to the home and other structures on the property. Home warranties apply to products or systems such as plumbing, washers and dryers, kitchen appliances, and more along those lines.
Pros and Cons of Home Warranty
You may be wondering what the pros and cons are when it comes to a home warranty. Here are a few that I see:
Pros:
- Can minimize the expense of surprise repair and replacement costs.
- Covers wear and tear breakdowns.
- Good for homeowners with expensive appliances.
- Pay less overall for repairs and replacements.
Cons:
- Charges a service call fee for each visit.
- Warranty does not cover improperly maintained products.
- If coverage is denied, the homeowner has to pay a service call fee plus repairs.
- May have a dollar limit on coverage or deductible.
- You must use the warranty company authorized by contractors.
So, is a home warranty for you?
Overall, a home warranty can provide you some peace of mind. Homeowners can be comforted with the fact that many surprise breakdowns can be taken care of easily and cheaply.
An alternative I suggest to my clients is instead of purchasing a home warranty, set up a reserve account. Put a certain amount of money aside each month for unexpected repairs. If nothing goes wrong, the account will grow and be available for remodels, upgrades, or even a down payment for your next home.
If you have any more questions about home warranties or need any assistance buying or selling a home, let me know and we can schedule a call or meeting. I am here to help you in any way I can!