Should you get a home warranty? If you’re a homeowner trying to reduce your rate or cut down on costs, your home warranty policy often goes up for evaluation. Maybe one was included in your original sales contract and it’s time to renew it, but should you? After all, you didn’t need it over the past two years and everything around your house looks fine and in good condition so why pay to renew? If you’re thinking about getting a home warranty or renewing an existing policy, here are some things you need to know first before making your decision. But if you’re thinking you’re already covered because you have homeowners insurance, think on that again. A home warranty and homeowners’ insurance are two separate items.
There are different types of home warranties and most home warranty companies offer two or three levels of coverage. Depending upon what is customary for your region, many times the first time a homeowner sees a warranty policy is when the seller agrees to provide one. In some areas, it’s almost an automatic to be part of the listing agreement and as part of the listing the seller agrees to provide a home warranty. In other areas, it can be a request from the buyer and part of a package of seller concessions. In this blog post, we’ll try to help you answer the question: are home warranties worth it?
What Does a Home Warranty Cover?
At its most basic form, a home warranty policy will cover the central air conditioning system as well as home heating systems. Kitchen appliances are also often covered automatically. If a stove goes bad during the term of the home warranty policy and the stove isn’t under a manufacturer’s warranty, the stove will either be fixed or replaced, based upon the opinion. Even if an appliance is still under the manufacturer’s warranty such warranties may not include both parts as well as labor. This means a home warranty policy can be useful even if appliances are still covered by the manufacturer.
Washers and dryers are covered, trash compactors are typically on the list of approved appliances as well. The plumbing system is covered as well as electrical systems. What is covered and what is not covered is clearly listed in the warranty. Home warranty companies allow homeowners to pick their own level of coverage. Most home warranty policies also require a small deductible to be paid upon each claim.
Now, let’s say the homeowners are about six months in their home when suddenly the refrigerator goes completely warm. The motor is burned out. The owner’s contact the home warranty company and file a claim. The warranty company contacts an appliance repair person from their approved list of companies. The service person visits the home, determines the refrigerator needs to be replaced. The owners then visit their appliance dealership and pick out a new refrigerator. The refrigerator’s maximum cost is determined by the policy.
So, Are Home Warranties Worth It?
Depending upon your level of coverage a premier warranty policy might be anywhere from $50 to $60 per month. At the same time, a brand new replacement refrigerator might cost upwards of $2,000. But remember the warranty doesn’t just cover the refrigerator but the HVAC system, other appliances, hot water heaters and more. So are home warranties worth it? To determine this for yourself, you need to consider the age of your home, any existing warranties on appliances and HVAC system and the cost to repair or replace. The more the cost of the warranty, the more things it will cover. You may also elect just to warranty the kitchen or specific items in your house as long as the warranty company allows you to pick and choose. Again, home warranty coverage will vary based upon what is customary for your area.
We talked about when and how a warranty is used but what happens if say there’s a storm and lightning hits the home and causes physical damage? That’s a part of the insurance policy, not the home warranty. Garage door openers? They’re typically not covered. Flooding due to storm? Not part of a warranty but can be covered with a flood insurance policy.
Home warranties can be paid for by the homeowner, the seller, the real estate agent and even the mortgage company with the issuance of a lender credit when buying a property. When renewing a policy, it’s the homeowner who must decide whether or not to renew. Set some time aside and take inventory of what could and would not be covered under a particular home warranty then calculate the cost to repair or replace that item. When you consider that an electrician might charge you $150 per hour just to show up at your home, a home warranty could be worth your payments in the long run.
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