Is purchasing a home warranty worth it?

As a homeowner, you just never know when you’ll face unexpected and costly repairs for your home.  A home warranty can sound like a great solution to this dilemma, but is it really worth it?

Home warranties have gotten a bad rap in the past, but just like any other warranty or insurance policy, the upfront cost could be worth it in the end.  But you do need to read the fine print and understand all of the terms and conditions!

Read on to learn more about the pros and cons of home warranties and whether or not it is something that will fit your needs and budget.

What is a home warranty?

A home warranty is a policy that covers repair costs for your home’s main systems or appliances. It’s usually purchased through a home warranty company.

It is different from your homeowner’s insurance or a manufacturer’s warranty on a product.

For example, it will cover the labor to fix a failed part on a product that your manufacturer’s warranty doesn’t cover. Or, it will pay for a plumber to fix a broken pipe but not the damage to your home, which your homeowner’s insurance policy should cover.

Therefore, it can work hand-in-hand with other home policies when something goes wrong.

It is important to keep in mind that a home warranty is different than home insurance.  It’s similar to how car insurance and a car warranty cover different items. Home insurance, like car insurance, covers unforeseen damage and catastrophes, whereas a warranty fixes things that break earlier than they should have.

What are the typical home systems covered and the yearly cost?

Policies typically include HVAC systems, water heater, furnace, plumbing, built-in appliances such as refrigerators or dishwashers, and for an additional fee you can add “extras” such as a swimming pool system.

One year of coverage typically costs $400-500 with a $100 deductible when you make a service call.

Who can purchase a home warranty?

In the past home warranties could only be purchased by new homebuyers at the time of settlement. But some warranty companies will allow a homeowner that has been in their home for a long time to buy a warranty.

What do consumers need to know before they buy?

It is very important to read over the fine print of your contract and understand what is covered and what is excluded. Here are some typical actions to be aware of for a standard package.

• Covers repairs on large systems (heating or air conditioning) but does not always cover replacements. Typically, it will help keep your appliances functioning and in working order.
• Typically covers normal wear and tear but not if the damage occurred because of homeowner negligence or lack of maintenance.
• Certain items are excluded. For example, it may cover refrigerator repairs but not the ice maker.
• Does not cover items once they reach beyond their serviceable life (i.e., 20+ years old).
• Does not cover pre-existing conditions. Items need to be properly installed, maintained, and in good working condition when you apply for coverage.
• They typically don’t cover roofs and exterior items.

What happens when I need to have something repaired?

A home warranty company requires that you contact them first when something breaks. They will then contact their service provider and send them to your home. They will pay the service provider once the claim is approved.

If you call a service provider without contacting the home warranty company first, they may not cover the repair.

You do not control who comes to your home to do the repair. This can be a major downside to some homeowners, especially if they have to wait a long time for a repair. For example, if your furnace breaks down during a cold spell, you may need to wait for the home warranty company to set things up with their subcontractor.

What if something is not covered when I thought it was?

Like any warranty, there are times the warranty company can choose not to cover something. That’s why you need to read the fine print carefully!

What to look for in a home warranty company?

• It’s important to find a reputable company that has been highly recommended by others. Check your local Nextdoor website or ask family and friends for recommendations.
• Investigate its long-term history and Better Business Bureau information.
• Compare coverage levels and upgrades to standard packages along with deductibles and service fees.
• Read the fine print in the contract to understand any co-pays and exclusions.
• Understand how you can cancel a contract.

If you are a current homeowner, new buyer, or investor and have any questions about home warranties just send me an email at bschein@fathomrealty.com.