Home warranties can save homeowners money if something breaks down. But it’s important to understand the cost of coverage before signing up for one.
Many real estate agents recommend buyers and sellers purchase a warranty before closing on a new home. This can help reassure clients who have depleted their savings to buy the home and want some reassurance that their investment is protected. Keep in mind that home owner warranties carry different warranties so be sure to know what yours is.
1. What is the coverage?
Home warranties can be helpful for new homeowners. They are designed to cover many of the expenses associated with repairs and replacements for appliances and systems in your home.
However, it’s important to read the contract carefully and understand what is covered by a home warranty before buying one. Some companies have coverage caps on certain items, and they may not cover pre existing issues found during a home inspection or listed in the seller’s disclosures. Some home warranty companies offer sample contracts to review, which can help you compare options.
2. What is the cost?
The cost of a home warranty varies, but you can expect to pay an annual premium that covers the cost of repairs and replacements for appliances and systems in your home. This fee can be paid in full or through a payment plan. In addition, you may have to pay a service call fee for any repair or replacement.
Home warranties are typically priced using loss cost calculations and databases of product failure information. The best way to understand the price of a home warranty is to ask your real estate agent for recommendations and request quotes from several companies.
3. What is the waiting period?
Home warranty companies have a waiting period before they’ll begin covering your appliances and home systems. This is to ensure that the home warranty isn’t being purchased to cover problems that were already present and to prevent people from filing multiple claims in a short period of time.
Typically, the waiting period is 30 days. However, some companies will waive this wait if you’re buying or selling a house and want to add the home warranty as part of the real estate transaction. Check the home warranty company’s contract to see if this applies to you.
4. What are the exclusions?
New home buyers are often surprised to learn that their home warranty does not
cover everything in their house. Some common exclusions include:
Most home warranty providers also exclude damage from pre-existing conditions, meaning that any repairs or replacements that you need due to a problem with an appliance or system that existed before you signed up for the warranty will not be covered.
Additionally, some companies have restrictions on the quality of appliances and systems they will cover, so it’s important to ask about this before signing up for a plan.
5. What is the claim process like?
Home warranty companies typically have a network of contractors that they rely on to perform repairs and replacements. It is important to understand who these contractors are and how they are selected.
Also, be sure to read the contract carefully to determine whether or not there is a waiting period for coverage on certain components. In addition, it is important to review the coverage limits and deductibles.
Ultimately, a home warranty can save buyers thousands in out-of-pocket costs and increase the value of their home. However, buyers should be aware that it is not a substitute for regular maintenance.
6. What is the customer service like?
Whether you’re buying a home or selling one, having a home warranty is a great way to protect your investment. When deciding on a provider, be sure to compare plans and pricing. Also, ask how long it takes for service calls to be executed and work to be completed.
Also, find out if the company only works with contractors who are licensed and bonded in your state. You want a provider who has a system in place to vet contractors and stop working with those who don’t meet the company’s standards.
7. What is the coverage for appliances?
Many homeowners choose to buy home warranty plans to ensure that their appliances are repaired or replaced if they break down. However, it’s important to understand the costs, coverage, and claims processes before purchasing one.
Unlike homeowners insurance, which covers damage caused by catastrophes or natural disasters, home warranties cover repairs and replacements to household systems and appliances that wear out over time.
A home warranty might be worth it for hands-off homeowners who would rather leave the repair work to professionals. Likewise, prospective sellers can use them as incentives when selling a home.