Buying a new home can be an exciting and expensive process. Often, after all the fees and services that need to be paid for, new home buyers have to tighten their budget and are left with very little money left over to handle a major expense. Unfortunately, even in newly purchased homes, things can break down.
It can be quite frustrating for a new homebuyer to finally move into their new home and have their furnace or refrigerator quit working. Often, these individuals do not have money available in their budget to afford repairs or a new system or appliance. This is where a home warranty can help.
What is a Home Warranty?
A home warranty is a service contract homeowner make with a company to provide repairs or replacement of covered items. The covered items of home warranty plans can range from the systems in the home to some or all the appliances used in the home.
Typically, homeowners purchase this contract for a set monthly fee or yearly cost. When a covered system or appliance has an issue, the home warranty company sends a service provider from their local network. Homeowners then pay a flat rate for any and all service provided for that service call. This flat rate can cover repairs or even replacement of the covered item.
Although homeowners do have to come up with the costs of the plan and the service fee, doing so can provide a number of savings. For example, if a furnace breaks down and needs to be replaced, instead of paying thousands of dollars for this, they only pay the flat fee. The home warranty company covers the rest of the cost.
What Does a Typical Home Warranty Cover?
Homeowners have a lot of options when choosing a home warranty plan. However, the typical plan provides coverage for both the basic systems of the home and the standard kitchen appliances. Homeowners can even choose to only cover the systems or appliances in their home.
The system plan usually covers the heating and cooling systems in the home. It can also cover basic plumbing and electrical systems. The home warranty for systems can even cover the water heater and electrical panel in the home.
The appliance warranty covers the typical appliances found in a home. This includes the refrigerator, oven, and dishwasher. It can even provide coverage for built-in microwaves. This ensures that the appliances needed for providing food in the home are properly functioning and able to provide the benefits homeowners need.
Can Additional Coverage Be Added?
Yes, additional coverage can be added to ensure every home and homeowner receive the protection they need. The typical plans cover the basic systems and appliances found in nearly every home. However, some homes have different systems and appliances that need to be protected.
Homeowners can add protection to cover their septic system or well pump if their home has these items. They can also extend their protection to cover pipe leaks or even provide coverage for leaks in the roof. For those who have a water softener system, they can have this covered in the plan as well.
Additional appliances can also be added to a home warranty. Homeowners can have their stand-alone freezer or extra refrigerator covered in case of a breakdown. They can even add other appliances, such as a wine cooler or their washer and dryer.
Many homeowners enjoy having a pool or spa at their home. Those homeowners can extend their home warranty plan to cover these items. This ensures that any problem due to normal wear and tear can be managed at a reasonable cost.
Is a Home Warranty Only for New Homeowners?
Although it is strongly suggested that new home buyers purchase a home warranty, those warranties are not exclusive to new home buyers. In some cases, a warranty can be purchased by someone other than the homeowner for a variety of reasons.
Home sellers and even real estate agents can purchase a home warranty. It can sweeten the deal for those looking to purchase the home by providing a warranty with the purchase of the home. It can also provide protection for the systems and appliances during the selling process.
Homebuilders can purchase home warranties. A home warranty for those building the home can have protection for issues that occur during the building process or even after the home is complete. The warranty can offer validation of the work quality as well as protect the builder’s profit.
A home warranty can even be purchased by a homeowner who has lived in the home for many years. This can provide the assistance needed to keep the home properly maintained, especially for seniors. The only caveat is that those with existing homes typically have to maintain the contract for a year before protection takes full effect.
Isn’t Homeowner’s Insurance the Same?
Although a home warranty and homeowner’s insurance seem very similar in that they protect the home, they are actually very different plans that provide different protections. Homeowner’s insurance is often a requirement when purchasing a new home by the bank providing the mortgage. A home warranty is completely optional.
The main difference between a homeowner’s insurance policy and a home warranty is that the insurance covers the unexpected and a home warranty covers the expected. Not every home will have a fire or break-in, but every home, at some point, will have a problem with a system or appliance due to normal wear and tear.
The typical homeowner’s insurance policy provides financial protection for the costs of damage due to a disastrous and unexpected event, such as a fire or storm. It can also provide coverage for the damages caused by theft or vandalism.
A homeowner’s insurance policy even offers liability protection. This covers the costs of damages or medical bills if a guest is injured on the property. It can even cover the property damage of others due to the actions of members of the household.
The expected events covered by a home warranty are the things that occur with the various appliances and systems in a home. These things only last so long. Eventually, even with proper care and maintenance, they will break down. A home warranty offers coverage for those breakdowns.
What are the Benefits of a Home Warranty?
There are many benefits of a home warranty for anyone that is purchasing the warranty. For sellers, it can make the property more enticing to potential buyers. It can also provide protection for the various aspects of the home while it is waiting to be sold.
No seller wants to sink money into repairing or replacing appliances or systems in a home they are leaving. A home warranty can prevent going through price negotiations due to broken-down appliances or systems. It can also prevent litigation due to a failure to disclose issues with appliances or systems in the home that have broken down.
For homebuyers, a home warranty can save them a lot of money when their budgets are the tightest due to the costs of buying the home. Very often, new homeowners use the appliances and systems in different ways than previous owners.
For example, a family of five moves into a home that was previously occupied by a couple. This can put extra stress on the water heater. The chances are the water heater will break down faster than anticipated. A home warranty can protect homeowners in these situations.
It can also be a benefit to those who are new to the area or for retired individuals that may have a difficult time finding local service professionals they trust. Homeowners can simply contact the home warranty company and a service professional will be dispatched to their home.
What are the Negative Aspects of a Home Warranty?
As with anything, there are also negative aspects to a home warranty that could give some homeowners pause before purchasing a service contract. However, many of these aspects can be circumvented by discussing any concerns with the home warranty provider.
Although considerably less than a homeowner’s insurance policy or even many repairs that are covered, a home warranty does cost. This can be a hindrance for some home buyers that have an extremely tight budget. However, a major system failure could potentially be far more expensive than the warranty.
Some home warranties may have strict definitions of pre-existing conditions or what constitutes proper care. Without proof of proper maintenance over the years or that the issue was not there previously, some companies may deny claims. This can be difficult for new homeowners since the covered items were under the care of the previous homeowners.
Another common issue with a home warranty is the wait times some property owners may face getting a service provider to their home. This can be a major problem when it is an emergency issue. However, many companies offer an online claims process that results in faster service.
Some homeowners feel as though they do not have control over the service that is provided. They complain that they do not get to choose service providers, nor do they get to decide what steps should be taken. For example, a system with a continuous problem that should probably be replaced is simply repaired over and over again.
Even when a covered item is replaced, some people feel they do not get a comparable replacement. For example, they may have covered the top-of-the-line refrigerator that is large enough to handle all their food needs. When it needs replacing, a smaller, lower-quality refrigerator is put in the home.
These issues may be a concern for some homeowners. However, not all home warranty companies are the same. A little effort and research can help to minimize the difficulties others have faced. Even with the drawbacks, a home warranty can be a very beneficial purchase for any homeowner.
