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Should I Buy a Home Warranty?

A home warranty does not take the place of property insurance.  Instead a home warranty is more like a service contract in which the home warranty covers repairs or replaces specified home components. Home warranties usually cost between $350 to $500 a year or more. They typically cover appliances, plumbing, heating and electrical system components, whirlpool tubs and ceiling and exhaust fans.  You can get coverage for additional items in your home for an additional cost. Home warranties also have a service fee that you will have to pay each time you need to have something repaired in your home.

Home warranties have become an item of negotiation if the seller isn’t offering one with the home from the beginning.  Some buyers will ask for a home warranty as a little extra protection in case something happens to one of the items that would be covered under the warranty. Even with a home warranty, I would suggest setting aside money to cover unexpected repair or replace cost within the home.  

New construction homes are warranted for up to 10 years, and the appliances in these homes are warranted for at least a year.  So you might want to consider if the actual need for a home warranty the first year. Buyers purchasing an older home will feel more comfortable with a warranty in place especially if the older home comes with older appliances.

It is so important to thoroughly read the fine print of a home warranty before purchasing.  Some warranties have the smallest of details that will prevent your items from being covered under the warranty.  Such as:

*You failed to maintain the appliance appropriately

*The appliance was not installed correctly

*The appliance is too old.  It has too much wear and tear.

Don’t make any assumptions about these warranties and what they will cover.  They have plenty of limitations.

Home warranties are great when they will cover your repair.  However they do have their disadvantages. Generally when you call in to request a repair, the company will choose who will make the repairs. On top of paying the yearly fee for the home warranty, you will have to pay a service fee each time you use the warranty.  Warranties can provide some peace of mind, but what if you buy the warranty and nothing breaks that year? If something does need repair, you might have to wait a little longer than normal to get it repaired.

If you’re considering buying a home warranty, make sure you fully understand the warranty policy so as to avoid two very common pitfalls.

*Don’t assume everything is covered by the warranty.  Read the policy to find out exactly what is covered and what isn’t.  

*Ask about any additional fees you might have to pay if you file a claim.

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