Are Home Warranties Worth It? What Homebuyers Should Know

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Are Home Warranties Worth It? What Homebuyers Should Know

Buying a home is stressful, and, while there’s a certain joy associated with finally getting those keys, that stress doesn’t go away completely on closing day. After all, you now have a house, full of expensive systems and shiny appliances, to worry about. And all of those items the home inspector pointed out. What happens if something breaks the day after you unload the moving truck? There is a way to alleviate that concern: a home warranty.

What Is a Home Warranty?

A home warranty is effectively insurance for the appliances and systems in your home. Technically a service contract, it covers repairs and replacements for these items when they break. That protection isn’t provided by homeowners insurance, which only kicks in when your property is damaged or lost to disasters, like theft, some major weather events or fire.

Home warranties commonly cover wear and tear to these items but not all home warranties are created equal, so make sure to read your policy:

  • Plumbing
  • Heating (furnaces and water heaters)
  • Air-conditioning
  • Laundry equipment (washers and dryers)
  • Roof leaks
  • Kitchen appliances, including refrigerators, ovens, ranges, dishwashers and garbage disposals

You can add other coverage as needed. Say the home comes with a pool, hot tub, well pump, computerized garage doors, security system, ceiling fan or ice maker. Home warranties usually last anywhere from 90 days to two years, with the option to renew once the policy expires.

The Benefits of a Home Warranty

Unlike homeowners insurance, which is required as part of the mortgage approval process, home warranties are optional. However, they are an invaluable safety net. Buying a house is already a major expense. The last thing you need is a broken furnace two weeks after closing, especially if it’s the middle of winter. The same goes for a busted water heater, which can cost anywhere from $523 to $1,000 to repair or replace.

Home warranties are particularly important if your new home is not so new and/or outfitted with older, outdated systems. Even if your systems or appliances don’t go down, the warranty spares you the expense of worrying about a major mechanical failure while you’re replenishing your bank account and emergency fund.

How Do Home Warranties Work?

If a covered item breaks, you call your provider to arrange for a contractor to come and assess the damage. If the contractor decides the necessary fix is covered by your warranty, they’ll do the work. You usually have to pay a service fee and, similarly to homeowners insurance, the warranty might have a deductible. That’s a set amount of money you put toward the bill before coverage kicks in.

Home warranties do carry some exclusions. For instance, they’re not an excuse for skipping routine maintenance as doing so can leave you on the hook for replacements or repairs.

It’s important to read the fine print of a home warranty you’re considering so you know what’s covered — and what’s not.

How Much do Home Warranties Cost?

Home warranties generally cost between $300 and $700 a year, depending on how comprehensive coverage is and the type of property (condo, single-family, townhouse, etc.) you own. The square footage of the house usually bears no effect on the price. Service fees can cost between $60 and $100.

You can capitalize on deals by looking into a home warranty during the real estate transaction. Sometimes, home sellers purchase a warranty as added incentive for prospective buyers. (These warranties, incidentally, protect their systems and appliances while the home is on the market.) You can also look into free or discounted policies provided by your home inspector.

Trademark Home Inspection, for instance, offers several coverages for free, including a 90-day home warranty, mold protection, SewerGard protection, roof protection and radon policy as part of its home inspection package. If you have questions about home warranties or want to schedule a home inspection in the Plymouth, Livonia, Westland or Ypsilanti area contact us today.

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