Experienced homeowners probably already know everything there is to know about home warranty but those who only recently bought their first home most likely have no idea what it is and why (and if) they need it. We’ll try to answer some of the most common questions regarding this form of contractual agreement.
What is Home Warranty?
To put it simply, home warranty is a contract you sign with a company in order to protect your appliances and home systems from breaking down. Well, you don’t actually prevent them from breaking down – you protect yourself from the consequences of the breakdown.
Most households in America are equipped with all sorts of appliances and systems, from heating and plumbing to smaller things like ice makers and door bells. These things break down all the time, and when they do, it costs money out of your pocket. That’s where home warranty kicks in. If you have home warranty, when something in your house breaks down, it’s not you who’s paying for it – it’s the company you signed the contract with.
How Does Home Warranty Work?
Most home warranty companies offer different levels of coverage in their plans. You pick a plan and sign a contract, usually for one year. Let’s say that during that period an appliance in your house breaks down and stops working. If it’s covered by your home warranty plan, you place a claim with the company’s customer service center, which tracks down a contractor from their network who is nearest to your location and can reach your home quickly. After the repair is done, you pay a service call fee (usually around $60) or a deductible, and the rest is covered by the home warranty company. In case the appliance you filed the claim for cannot be repaired, it will be replaced. Repairs are usually handled pretty quickly but replacing parts or entire appliances or pieces of equipment may take a while since they need to be ordered from the manufacturer.
Do I Need Home Warranty?
In most cases, the answer to this question is yes, simply because things break down all the time and repairing and replacing them costs a lot of money. Home warranty plans are a good idea for homes with a lot of appliances, where there is a good chance, statistically speaking, that something will break down. Plus, there is the peace of mind that this kind of contract provides.
Home warranty is generally a good idea for real estate professionals, as selling a home with major systems and appliances covered by a home warranty plan greatly increases the value of the property.
On the other hand, home warranty costs on average between $500 and $1,000 per year, and if not a single appliance in your home breaks down during that time, it’s basically pouring money down the drain.
A Few Things to Look Out For
Home warranty can definitely be a great thing, something that helps save money and provides peace of mind, but there are certain things you should be careful about when considering buying a plan.
First of all, it’s essential to carefully read all the fine print, terms and conditions, and such. There are a lot of limitations, restrictions, and exceptions to coverage plans that you need to take into consideration. For example, some companies will not cover systems and appliances that have passed a certain age. Others will refuse to cover appliances still under an existing manufacturer’s warranty. Some companies place a cap on the annual value of your claims or on the number of claims you can make per year. Some might insist on repairing an appliance beyond repair instead of replacing it. Also, your warranty might not cover the entire cost of the repair/replacement, and so on.
Another thing you should remember is that home warranty companies do not allow you to pick the contractor of your choice, meaning they send their own when you report an issue. If that’s not something you’re comfortable with, maybe a home warranty is not the right choice for you.
The bottom line is there are plenty of pros and cons to home warranty. It can be tremendously helpful but it can also turn out to be a disappointment. As long as you remember that not everything in your house is covered and read and understand the company’s terms and conditions, you can have a very good experience and gain a lot from this kind of home protection service.