You’re well on your way to closing on your new home and you might be wondering if you should purchase a home warranty. We break down what exactly a home warranty is, how they work, what they cover and how much they typically cost. Related Reading: Steps to Buy a Home.
What is a home warranty?
It’s easy to understand why a home warranty and homeowners insurance get confused so frequently.
• Homeowners insurance insures your complete home, structures belonging to the home, and possessions in case of loss or damage.
• A home warranty covers repair or replacement of certain features of the home. Depending on the contract, a warranty will usually include large appliances and home systems like the HVAC and hot water heater.
How does a home warranty work?
If an issue comes up for a home feature covered by the warranty, you will call the home warranty company or fill out a repair request online. The warranty company will notify a professional contractor and they will contact you to schedule an appointment. This could take several days or even longer in high volume repair request times (think hot summer or very cold winter days for HVAC systems).
You will be charged a non-refundable service call fee usually ranging between $75-$125. Make sure you know the exact procedure to have the item replaced. Are you required to purchase through the warranty company? Via the contractor? Can you pick and choose?
Expect a replacement cap if an item needs to be replaced. Review these before you sign on a work order or contract, so you are aware of your expenses should you need to completely replace a feature covered by the warranty.
What is included in a home warranty plan?
It depends on your policy. The average price of a home warranty is between $350-$800 or more. You can reduce your cost by choosing a higher deductible or by selecting a plan with fewer items covered. Make sure that all your systems are insured. Be prepared to pay extra for additional furnaces, water heaters, hot tubs, or appliances. Some home warranty companies might decline coverage if items are not in working order or classified as end of life. This requirement varies though.
A home warranty plan does NOT cover roof, landscaping, fencing, decking or similar items.
Who pays for a home warranty?
The seller might offer a home warranty as a buyer incentive or they might agree to purchase a home warranty in lieu of replacing older appliances. Let us know if you are considering purchasing a home warranty yourself. We might be able to negotiate a discounted rate for you.
Related Reading: What is the Inspection Period?
Are home warranties worth it?
It’s a personal preference. Home warranties can absolutely be worth the investment. It’s difficult to know for sure until you have purchased the warranty and utilized its services. While some people don’t have any items to repair that first year after purchase, others might need several service calls. It really depends on your home and the ease of using the particular home warranty company. Home warranties can be particularly helpful for first time home buyers and out of town owners.