If you are in the process of buying a home, you may be wondering if a home warranty is necessary or worthwhile. Here are some things to consider before you buy.
If you are buying a newly-constructed home, everything in it should be covered by the builder (or the manufacturer, in some cases) for a specified period of time. If you are evaluating an older home, a home warranty may be a good idea. If you are looking at a foreclosure, where presumably the current owner didn’t have the money to pay the mortgage, never mind do regular maintenance, a home warranty may be a really good idea. A home warranty is not the same as homeowner’s insurance, which is intended to cover the property in the event of fire, theft, or natural disaster.
A home warranty usually covers electrical or mechanical items such as air conditioning and heating, plumbing, electrical wiring, and certain appliances such as ranges, dishwashers, refrigerators, washers, and dryers. Read the fine print carefully as some appliances may only be covered based on an additional premium and the amount paid to replace major appliances like air conditioners may be prorated based on the age of the unit. The typical premium is about $500 for a one year policy. There is a service charge of about $50 – $75 each time you call for repairs under the policy, and this will be stated in the policy.
It is important that you have an inspection completed on everything that may be covered in the policy. This is a smart thing to do anyway. If you are buying a home in the middle of winter, you don’t want to turn on the air conditioner in July and find out it doesn’t work at all. If you have an inspection and then have a problem, the insurance company won’t be able to claim that the item wasn’t working prior to the inception of the policy.
There are several advantages of a home warranty. If you’re not an experienced handyman, the policy may be a good choice. You won’t have to shop for contractors, but will simply call the number provided by the insurance company. If you are buying an older home and you have any worries about major appliances, and if you understand exactly what the policy provides, you can relax and not worry about the elderly furnace giving out.
Home warranties are insurance policies. Insurance companies can be good or bad. They will almost always try to make a repair rather than do a replacement, even if the replacement is really what is called for. Depending on the company, customer service may vary. Documentation of regular maintenance may be required, or the insurance company may attempt to blame the problem on you. Be prepared to be persistent and know exactly what you’re entitled to. If the home warranty was suggested by your Realtor, don’t hesitate to get her involved. If she does a lot of business with the insurance company, she may have some clout.
If you think a home warranty is important, include it as an item for the seller to provide when you present your offer on the house. In a buyer’s market, this is not an unreasonable thing to ask for.
If you do your homework and understand your rights under the policy, a home warranty can indeed provide a safety net to keep you from having large unexpected expenses and leave you free to enjoy living in your new home.