Is a Home Warranty Right for You?
Home warranties can be great resources that help homeowners avoid some of the unforeseen costs of homeownership. They can also be valuable and strategic resources to be used when either selling a home or house hunting. In the following article, we'll discuss the basics of a home warranty and whether it might be right for you.
What is a Home Warranty?
Home warranties are service contracts that provide owners with protection and coverage on household systems and appliance, which are not usually covered by homeowners insurance policies. Home warranties cover the repair or replacement of major home systems and appliances that break down due to normal wear and tear.
What Does a Home Warranty Cover?
While the specific coverage of any home warranty are covered in a contract, home warranties typically cover: plumbing, heating, air conditioning, and major appliances. Home warranties are typically sold in tiered level coverage packages, which range from basic coverage to more comprehensive levels of coverage, as well as a la carte coverage for systems or appliances not included in existing packages.
How Does a Home Warranty Work?
When a problem arises with a home system or appliance covered under the home warranty, the homeowner contacts the home warranty company, who in turn contacts and dispatches a qualified professional to fix the problem.
What Are the Benefits of a Home Warranty?
Depending on your situation, there may be many benefits of purchasing a home warranty.
If you are a home buyer:
- Simplicity – One contract covers most of the major systems and appliances in your home from wear and tear. Whenever something breaks down, there is only one number you need to remember to call to get a qualified professional to your home to fix the problem.
- There are no limits to the number of service calls that can be requested (however, there is typically a small, pre-determined fee paid to the technician for each service call).
- Cost savings – The cost to replace or repair one major household system can often be more expensive than the cost of a home warranty.
- Home warranties usually cover all makes and models, no matter what the age of the system or appliance, as long as they are in good working order at the beginning of the contract.
If you are a home seller:
- Home sold with home warranties often sell faster and for a higher price than comparable listings sold without a home warranty? Why? Home warranties offer the buyer peace of mind and give the seller a competitive advantage.
- Home warranties discourage price bargaining. If the majority of the systems in the home are already covered with a home warranty, a buyer has less justification for a lower price or considerations.
- Less liability – With a home warranty, the majority of the systems and appliances in the home are covered. If something breaks after a deal is negotiated and closed, there is less of a chance of bad feelings on the buyer’s side and therefore, less of a chance of legal action.
- Home warranties are transferable to the new owners of the home.
- No unexpected, last minute repair costs. If a seller has a home warranty in place, and the buyer’s home inspection detects a problem with a covered system or appliance, it can be quickly fixed with no large out of pocket expenses.