What Is a Home Warranty, and Do You Need One?
A home warranty is an annual service agreement which covers the costs of repairs or replacement of many appliances or home components that can breakdown due to normal wear and tear from frequent use. Home warranties are usually recommended for first-time home owners with limited experience in home maintenance. Warranties are not meant to replace homeowner’s insurance. They offer additional coverage for items usually not covered by homeowner’s insurance. A home warranty offers peace of mind and safeguards against surprise expenses due to appliance breakdowns or malfunctions.
Manufacturer warranties usually offer coverage for a failed part; however, they don’t often include costs of labor for repair or installation. A home warranty usually offers coverage for both replacement parts and labor. Most home warranty plans offer the same basic coverage and protocol:
- When the system or appliance breaks down, the homeowner contacts the home warranty company.
- The warranty company contacts a local service provider.
- The service provider contacts the homeowner to schedule an appointment.
- The homeowner usually pays a small trade service fee for the visit. This fee is usually less than $100.
- Items most commonly covered include: HVAC systems, hot water heaters, dishwashers, ductwork, garbage disposals, common kitchen appliances, ceiling fans, electrical and plumbing systems, doorbells, telephone or alarm wiring.
Non-mechanical items throughout the home such as doors, walls, and windows are not usually covered, as well as outdoor items such as sprinklers and exterior faucets. Normal home maintenance items such as HVAC filters or hot water heater flushing are not usually offered. Premium or optional coverage may be required to insure items such as outdoor pools or second refrigerators. Normal maintenance to insure proper upkeep on appliances is required from the homeowner to keep the home warranty in effect. Improper installation or pre-existing conditions are usually excluded, as well.
Most policies are prepaid annually. As they approach their expiration date, the home warranty company will usually offer continued coverage for a slightly higher fee. Most home warranties range in cost from $300 to $500. The warranty is transferable if you sell the home while the warranty is still in effect, where permitted by law. The new buyer will be covered for any remaining months left on the contract.
When buying your home, the home warranty can be purchased by either the seller or buyer. This provides peace of mind for the buyer, while also insuring the seller won’t be contacted if something breaks down after closing. Warranty policies offered in real estate transactions generally offer the best coverage for the price.
When shopping for a home warranty, request sample copies of each company’s policy before committing to the policy. Home warranties can provide money-saving coverage and peace of mind to a new homeowner. Home warranty coverage varies by policy. Be sure to review your contract thoroughly. Ask questions and be sure you fully understand the protocol for filing a claim. Most new homebuyers dismiss home warranties, since appliances are usually covered by the manufacturer warranties. The older the home, the more likely something is going to break down. A home warranty for an older home is a cost-effective way to avoid budget strains. Not everyone values what a home warranty can offer them. If you live with the idea that preventive measures are always the best option, then a home warranty is something to consider in your purchase package.