Do You Need a Home Warranty?
Not many people really understand what they are getting with a home warranty. Most times, they are thrown in with a real estate listing to entice the buyer to bid more aggressively. As a result, at any one time, about a quarter of owned homes have some type of home warranty policy that covers some of the smaller things that a homeowners insurance policy does not. Small plumbing problems? Appliance issues? Perfect. Those are the types of things home warranties are meant to protect you against. And while there are people who may have had just enough minor breakdowns to deem their home warranty a deal, there are others that have been surprised that the small print can tend to be tricky. In some states, home warranties aren’t even a regulated industry. For most, a home will be the largest, most important purchase they make in their lifetime. Of course it is natural that one would want to protect that purchase, but it is important to understand if a warranty is the answer.
Things to look for:
*What does a proposed warranty cover?
- You will often find that the home warranty will cover for the repair or replacement of really basic systems, including electrical, heating, plumbing and major appliances.
- Most companies that specialize in providing home warranties will also provide coverage for other items, such as air conditioning, hot tubs, and septic systems, at an extra cost.
*What will a home warranty cost?
- Think of a home warranty like a health insurance plan; when you go to the doctor, you pay the premium, and your insurance plan covers the rest. Warranties are no different. You will pay the cost of the service call ($50-$100 per issue, and some don’t cover permit costs) with the warranty picking up the remainder of the costs.
- Annual costs can range anywhere from $250 to $600 per year. As mentioned above, you can add to your plan to cover a larger array of items for an additional cost.
- Remember, a builder’s warranty differs from a standard home warranty.
*What can you expect when trying to utilize a warranty?
- Scheduling can be a problem when using a home warranty company approved repair firm.
- Home warranty companies have contracted partnerships with specific companies; you will not be able to choose who your service technician is.
- As a result, service technicians may try to sell you additional and sometimes unnecessary services.
*What are the cost benefits of having a warranty?
- Scenario 1: You have a $600 home warranty policy that you utilized only twice one year; once for a stopped up sink and another to replace a heating element in an oven. You probably have not saved a substantial amount of money in this scenario.
- Scenario 2: You have a $600 policy that replaces a $3,500 air conditioning system, in this scenario the home warranty has saved you money.
*Are there any exclusions or conditions to utilizing a home warranty?
- Read the agreement and terms and conditions carefully. Normally pre-existing problems are not covered.
- If the house is not up to current building code standards, some home warranty companies will not pay for certain repairs.
*How do I know which home warranty company is best for me?
- A quick internet search should do the job of finding a home warranty company’s history. Also, most public companies will have annual reports available so you can check their financial stability.
*What about a builder’s warranty?
- Builders who use subcontractors receive warranties from the subcontractors for materials and parts.
*Should I pay for the repair or get a replacement?
- Home warranty companies tend to choose the cheaper repair over replacing an item.
- Major appliances more than 7 years old should probably be replaced instead of repaired. They should also be replaced if repair costs are more than half what the replacement cost would be.