What is a Home Warranty and is it Right for You?
A home warranty (Home Protection Plan) is usually offered when you buy a home, sometimes a one-year warranty is even included by the seller. A home warranty offers protection against expensive, unexpected repair bills and can provide many great benefits… but is it right for you?
What is a home warranty, exactly?
A home warranty should not be confused with homeowner’s insurance. Homeowner’s insurance covers damage or loss to your property caused by fire, theft, flood or storm damage. A home warranty, on the other hand, provides discounted repairs or replacement of your home’s main components such as heating systems, electrics, plumbing and often large appliances too, which break down through normal wear and tear.
How does it work?
A home warranty is a service contract between a homeowner and a home warranty company. If a system or appliance covered by the warranty breaks down, you contact the warranty provider to make a claim. They will send out a technician (typically within 48 hours) to assess the problem and determine whether it can be repaired or replaced. If it can, you will usually pay a fixed service fee of around $75-$150 and the technician will carry out or arrange the repair or replacement.
Pro Tip: Create and follow a home maintenance schedule. Whether you choose a home protection plan or not, regular maintenance prolongs the lifespan of your systems and appliances.
How much does a home warranty cost?
The cost of home warranties varies depending on what plan you buy and which company you buy it from.The cost of a home protection plan is usually in the range of $350 to $700 annually, but it can be more or less. It is also important to note who pays for home warranties: some are paid by the seller before the buyer purchases the home, some are given to the buyer from their realtor as a closing gift, and, of course, some are paid by the homeowner when needed.
What is covered by a home warranty?
It’s important to check your plan, but typically the cover will include:
- Air conditioning
- Heating systems
- Ceiling fans
- Large kitchen appliances such as washers, dryers, ranges and ovens
What is NOT covered by a home warranty?
The following are often not covered by home warranties:
- Pools and spas
- Garden faucets and sprinkler systems
- Electric garage door openers
- Some appliances
- Items that were not properly installed or maintained
- Things that were broken prior to closing
Is a home warranty right for you?
When you purchase a property, a home warranty provides peace of mind and reassurance that you will not have to pay out-of-pocket for repairs or replacements to make your place livable and functional.
- Provides peace of mind
- Protects home buyers against potentially costly repairs/replacements
- Saves time finding and booking contractors in the event of a breakdown
- Useful if you are purchasing an old home with unreliable appliances/utilities
- Most warranties will not cover items that have not been properly maintained.
- Little say in the contractors or brands chosen for your repair or replacement.
- Many years could go by without the need to use the warranty, particularly if you are buying a new property with modern appliances and utilities.
- It might be more cost-effective to put money aside into your own emergency fund for unforeseen maintenance and repairs.
- If you are buying brand new goods for your new place, these will be covered by manufacturers’ guarantee so it may not be necessary to have a home warranty straight away.
How beneficial a home warranty is for you will depend on your individual circumstances. For more homeownership advice visit ilendi.com.
My home warranty didn’t cover my air conditioning, but it would be cool if it did.