When you buy a home, the last thing you need to worry about soon after closing is something malfunctioning in the home. A home warranty plan can give you peace of mind as it covers many items and systems in the home.
Here is an overview of the benefits of a home warranty, how much it costs and what you should expect.
Whether the seller pays for the warranty plan or you, the buyer, depends mostly on local customs; in most areas, it is common for the seller to pay for the coverage, because it also protects the seller from receiving calls from the buyer when something breaks down. Some real estate agents also give home warranties as a gift to buyers at closing.
When you buy a home, you need to keep in mind that everything is used, including the furnace, washing machine, sink, plumbing system and refrigerator, when included. A home warranty plan can pay for itself in a single visit, and you may want to give yourself the peace of mind knowing you will not have to spend a lot of money on a big-ticket item shortly after buying the home.
It helps to understand the typical life span of appliances to decide if a warranty is really a good deal. Even with new systems and appliances, manufacturer warranties can be less than one year, and the more technology in modern appliances increases the chances that things will go wrong. Most appliances have a life span of 11 years or so.
Getting a home warranty will not always be worth the cost. If you are buying a home with brand new appliances or a newly built home, you can probably skip the warranty.
Home warranty plans are usually very affordable, ranging from $250 to $400, depending on the coverage you get. The policies are prepaid for one year, at which point they may be renewed or allowed to expire.
Many companies offer warranties, each with specific levels of coverage, but most operate in the same way:
If a covered appliance or system breaks down, you call the home warranty company. The company will then call a provider, who calls you to make an appointment. The provider will fix the problem and, if it cannot be repaired, depending on your coverage, the warranty company will pay for the replacement and installation of a new appliance. In exchange, you pay a trade service fee, usually $100 or less.
You will want to ask exactly what is covered by the warranty, and ask your real estate agent if you can get an upgrade. Make sure you understand whether or not the company will pay for repairs to make certain systems or appliances, compliant with modern regulations.
Many appliances and systems in your new home will be covered by a home warranty, including the:
There are many items that are virtually never covered by a home warranty plan, however. This includes any outdoor items such as sprinkler systems, faucet repairs, permit fees and haul-aways. Some plans also do not pay for washing machines, dryers, garage door openers and refrigerators.
In some cases, a home warranty company will deny a claim. If this happens, you have the option of contacting your real estate agent to complain. Most agents maintain good relationships with representatives for home warranty companies and your agent may be able to seek a resolution for you.
Common causes of denied payments include:
Remember that home warranty plans are a "buyer beware" investment. Make sure you see a copy of the policy before you sign and understand how the service will work.