As every homeowner knows, maintaining the inside and outside of a home takes effort and money. It’s not uncommon for something to go wrong unexpectedly, even if the home is well-maintained. Appliances and major components like gas fireplaces, HVAC systems, and water heaters eventually need to be replaced and can malfunction at any time. Although some appliances can last for decades without incident, that is often the exception rather than the rule.
Purchasing a home, along with the ongoing costs related to routine upkeep, upgrades and replacements, and repairs, is often a top investment for middle-class households. Learning about buying a warranty can help current and prospective homeowners evaluate short- and long-term maintenance costs. Home warranties can offer peace of mind and make it easier to budget for unexpected repairs. However, there are some ways that home warranties differ from paying for repairs and upkeep outright that owners should know about.
Home warranties require you to work with the warranty company’s authorized contractors in your area. When something goes wrong with covered appliances or home systems, you’ll start the claim process and the warranty company will dispatch an authorized contractor to make repairs or replace the item. Without a warranty, you would normally have to find a suitable vendor by yourself, schedule a service call to diagnose the problem, and choose whether to make the recommended repairs or replacements. You are also subject to the payment terms of that vendor.
Although some homeowners prefer the ability to choose their own vendors, a home warranty company’s authorized contractor are obligated to complete the job within a specified time frame. This means you may get prompter service and will not have separate out-of-pocket expenses for the repair or replacement work. Emergency service requests are also available for mishaps that endanger the integrity of the home or the health of the residents.
Are There Fees Involved?
The cost for vendors to repair or replace appliances or covered systems is covered as part of the warranty. However, the owner is responsible to pay service fees to the authorized contractors to determine what the problem is and what needs to be done. Service fees for each incident can run below $100 to slightly over $100. These are considered out-of-pocket costs for the homeowner.
Home Warranties and Insurance
The main difference between a home insurance policy and a home warranty is the scope of coverage. An insurance policy will pay for losses and damages that are caused by natural disasters, vandalism, theft, and arson. A warranty covers breakdowns of appliances, HVAC systems, plumbing, and electrical systems that happen due to age, malfunction, or normal wear and tear.
Home warranties can cover gaps that your insurance policy doesn’t cover. If you have a mortgage, your lender will require you to take out an insurance policy that meets the lender’s minimum coverage standards. Even if you don’t have a mortgage, it’s best to still pay for an annual insurance policy. In the event of damage caused by storms, harsh weather, or vandalism, you won’t have to pay for the repair or replacement costs completely out of pocket. An insurance policy can provide you with the funds to replace your personal property and home in the event of a total or partial loss.
Home Warranty Coverage Can Vary
As a property owner, you can choose when to take out a warranty and the amount of coverage. Some warranties are strictly for major appliances, while others cover all major appliances and systems within the home. If you own more than one residential property, you can also take out warranties on each property according to the amount of coverage you need. Many companies offer different coverage terms—anywhere from one to ten years.
Warranties May Have Waiting Periods
If a homeowner purchases a new warranty on a new or existing property, some companies may institute a waiting period. For instance, an owner that has lived in his home for three years decides to buy a home warranty because the home is aging. As a customer, the owner may need to wait for 30 days before he can issue a claim or request services.
On the other hand, if a warranty is transferred from a seller to a buyer as a condition of a home purchase, there may not be any waiting period. This may also apply if a homeowner renews a warranty he already has in place. Essentially, warranties that are not a part of an initial purchase or represent renewals are more likely to be subject to waiting periods.
Does the Homeowner Always Pay for the Cost of the Warranty?
In some cases, sellers will cover the costs of a home warranty for the new buyer or transfer an existing warranty without figuring the cost into the home’s asking price. Sometimes, sellers include warranties if they are motivated to sell the home quickly. Including a home warranty can also make the home sell faster in a buyer’s market or if the age of the home is likely to be a concern among prospective buyers.
There are cases where a buyer will ask the seller to include a warranty when negotiating the real estate contract. If the prospective buyer has concerns about the age of appliances or major components like the HVAC system, this is more likely to happen. Alternatively, a buyer may try to negotiate a lower sale price for the home.
Purchasing a home warranty is an individual decision. It can depend on the age of the home, the condition of the appliances and major components, and the owner’s needs. However, even new homes or new appliances can produce problems. Home warranties provide the owner with reassurance if something goes wrong.
Warranties serve as a complement to insurance policies, covering expensive items in the home that insurance does not. The monthly costs of warranties can vary depending on the amount and length of coverage. Although warranties do not eliminate all out-of-pocket costs, they can help mitigate unexpected expenses and ensure an owner stays on budget.