Home Warranties 101: Your Everything Guide to Home Warranties

Home warranties are an optional type of coverage to help offset major expenses that might occur in a house. Many new homeowners opt to purchase a home warranty to safeguard themselves against expenses if a major repair is needed. Homebuyers sometimes negotiate for the seller to cover the purchase of a home warranty, at least for the first year. Not quite sure about whether (or not) to get a home warranty? Here are the answers to commonly asked questions.

What is a Home Warranty?

Home warranties are covered against the breakage of major home appliances and systems. Like any other warranty plan, it’s a financial safeguard against unexpected major out-of-pocket expenses. Essentially, the home warranty covers issues that aren’t protected by homeowners’ insurance. Home warranty plans often have base coverage and consumers can choose to add an optional coverages.

What do Home Warranties Cover?

Home warranties typically cover service, repair, or replacement when appliances (major) break or the home experiences a significant systems failure. Usually, the policy is specific about what’s covered and what’s not. Before purchasing a home warranty, it’s important to always read the fine print because most companies include exclusions many consumers would assume are covered.

Most warranties cover major home systems including HVAC, electrical, ductwork, interior plumbing, roofing leaks, and the water heater. Big-ticket appliances are also usually covered and typically include dishwashers, garbage disposals, ovens/ranges/cooktops, refrigerators, washers, dryers, garage door openers, and ceiling fans. This is not an exhaustive list but an example of what is typically covered. Usually, anything cosmetic in nature is not covered under these policies.

How Long do Home Warranties Last?

Generally, home warranties last for one year with options to renew. Other policies are structured month-to-month, while others offer two- to three-year long-term coverage options. Consumers who purchase a home warranty should review their coverage each year. This is to ensure it’s still worth the cost or if items or system components have been replaced and are now under manufacturer warranties.

How Much do Home Warranties Cost?

How much a policy costs will largely depend upon several factors. On average, in the U.S. a home warranty costs roughly between $400 and $800 per year. If utilized, some policies also require the policyholder to pay a deductible, along with any fees associated with service calls which indirectly increases the cost of the warranty; usually, this ranges from $100–$200 per visit, depending upon the type of contract purchased. This sounds like a lot of money—and it can be—but considering the thousands of dollars that may be spent to repair a problem with the HVAC or another major system, for some homeowners, this worth the cost. Whether the cost of a warranty is worth it will involve weighing the pros and cons of home warranties.

Should I Get a Home Warranty?

Many consumers opt to obtain a home warranty when manufacturers’ warranties have expired. This can help offset the costs associated with breakages or provide peace of mind. For example, sellers will often buy one either to protect themselves against last-minute major expenses or to offer as an enticement to buyers. New homeowners may take a policy out to safeguard themselves against unforeseen problems with the home or its appliances.

Before purchasing a home warranty, it’s important to do one’s homework and conduct a cost comparison. Not all home warranties are created equal. Some plans have cost limits in place to fix or replace items or system components. Others may only cover parts of a repair. For instance, the refrigerator might be covered under the warranty, but not the icemaker. Knowing what’s covered will help decide on the right plan or whether to buy one at all. Also, important to consider are deductibles and annual costs. Be sure to thoroughly understand any policy before signing on the dotted line and making a payment.

Courtesy Spyglass Realty. Find full article here.