When buying a new home, people often consider purchasing a home warranty. Sometimes the seller will choose to purchase one, and sometimes they will be advertised to you separately.
While warranties are generally seen as beneficial because they cover unpredicted repairs, there’s more you should know about them. Here are the basics.
What is it?
Different than insurance, home warranties don’t cover large-scale disasters. Rather, it covers individual aspects of a home. Buyers and home warranty companies can negotiate which facets of the house are under warranty, and thus will be repaired at a reduced rate. Generally, air conditioning, furnaces, appliances, plumbing, and electrical are included. This works by the warranty company contracting with providers and then calling those providers when something in your house is broken.
How much does it cost?
Though the cost varies depending on the plan, it’s typically a few hundred dollars per year. Additionally, buyers are responsible for an annual premium, as well as a service fee. This fee usually ranges from $75 to $125. Of course, buyers are also financially responsible for repairs that don’t fall under the purview of the home warranty.
What are the advantages?
Home warranties can provide financial and e benefits. Additionally, it reduces the amount of time a homeowner needs to spend searching for the repair person they would like to hire. For people trying to sell a home, offering a home warranty may make buyers more keen on making an offer, as they will feel reassured.
What are the disadvantages?
One of the frustrations people have with warranties is their lack of coverage for parts of the house that have not been cared for appropriately. Some companies may even use this to wiggle out of covering claims. Of course, warranties are also a gamble. If many things break, you get your money’s worth- otherwise, you don’t. Finally, the homeowner doesn’t have a lot of say over the repair people who do the work, and there isn’t much recourse if they don’t like them.
What’s the consensus?
When purchasing a home warranty, homeowners should be cautious in reading the contract thoroughly and researching the company they are using. Under good circumstances, they can be quite helpful.