The seller may offer to purchase one on your behalf to provide peace of mind that any component of the home can be fixed affordably; if not, you will likely receive numerous mail solicitations to purchase a home warranty once the sale closes. Home warranty companies have agreements with approved service providers. When something that is covered by a home warranty breaks down, the homeowner calls the home warranty company, which sends one of its service providers to examine the problem.
If the provider determines that the needed repair or replacement is covered by the warranty, they complete the work. The homeowner only pays a small service fee, plus the money already spent to purchase the warranty. A home warranty costs several hundred dollars a year, paid up-front or in installments, if the warranty company offers a payment plan.
Separate structures, such as guest houses, usually are not covered by the basic policy but can be covered for an additional fee. However, garages should be included as a standard feature of a warranty.
If the problem requires more than one type of contractor to visit e. More about this drawback below. Furthermore, if the warranty company denies a claim, the homeowner will still have to pay the service fee and will also be responsible for repair costs. Like all warranties, a home warranty is supposed to protect against expensive, unforeseen repair bills and provide peace of mind.
Warranties can also make sense for people with expensive tastes in appliances. The subject of home warranties often comes up during the sale and purchase of a home. A warranty can also be helpful for people who have just depleted their savings to buy a home and want to avoid any additional major expenses.
For home sellers, offering the buyer a paid-up, one-year home warranty with the purchase may provide a measure of protection against buyer complaints about any discovered problems or defects that arise after the sale closes.
However, providing a home warranty does not exempt the seller from the legal requirement to disclose any known problems with the home. One major problem with a home warranty is that it will not cover items that have not been properly maintained.
What is considered proper maintenance can be a significant gray area and is the source of many disagreements between home warranty companies and warranty holders. In a worst-case scenario, unscrupulous warranty companies may use the improper maintenance clause as an excuse to deny valid claims. In another scenario, the homeowner and the contractor who makes the house call may simply disagree over what constitutes proper maintenance.
Another common problem is that when a homeowner purchases a used home, it might come with a year-old furnace that the previous owner did not maintain. In addition, warranties have numerous exclusions, as well as dollar limits per repair and per year. Bankrate has answers. Our experts have been helping you master your money for over four decades. Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate.
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Purchasing a home warranty can help alleviate some of the financial burden new homeowners face when a major appliance or home system goes out. A home warranty is not an insurance policy, but rather a service contract that pays the cost of repair or replacement of covered items, such as major kitchen appliances, as well as electrical, plumbing, heating and air conditioning systems. Separately, homeowners insurance covers losses incurred if your home and belongings are damaged or lost due to fire, theft or other perils.
At her listing appointments, Coleen Smith, a real estate agent with Portside Real Estate Group in Falmouth, Maine, routinely suggests a home warranty to home sellers as a way to attract prospective buyers.
She also recommends them to buyers. You can imagine more if you want enhanced coverage for such things as washers and dryers, pools and septic systems. Without a home warranty, you could spend hundreds or thousands of dollars repairing or replacing major appliances or systems.
According to HomeAdvisor, here are the average national costs to replace some major home systems:. One caveat, however: If the home is older and its systems outdated, it might not be possible to repair something that breaks, since the replacement parts might not be available. Ultimately, you have to decide if the peace of mind matters more than the expense. If the plan only covers a fraction of the cost you would expect to pay for repairs, then it might not be a good investment.
Related: Cheapest Home Warranty Companies. Home warranties are worth it if there is no existing coverage for your appliances and home systems and if you find a plan that includes the items that you want covered, so you end up saving your money rather than wasting it.
You could always try it for the first year or two, while you get to know the place and see how the appliances work and cancel later.
Forte suggests asking your real estate agent if they have any home warranty companies to recommend. The important thing is to do your research and choose a plan with the right kind of coverage for your needs-or you could end up paying a lot for repairs out-of-pocket and paying for a warranty you don't use.
Here Are the Pros and Cons. By Hiranmayi Srinivasan June 24, Save Pin FB More. Comments Add Comment. To learn more or opt-out, read our Cookie Policy. Keep reading to to learn if a home warranty would be worth the investment.
Affiliate Disclosure. A home warranty , also known as a home protection plan, is an annual service contract that covers major appliances and systems in your home when they break down due to normal wear and tear. This type of protection from a top home warranty company can save you from paying expensive, out-of-pocket costs on repairs and replacements. This type of home protection plan will provide peace of mind if a major home item fails and it will prevent you from spending hours searching for a trusted contractor in your area to complete repairs.
You may end up recouping every penny you paid for the home warranty with just one service call a year. Note: Most home warranty plans include coverage caps on different home systems and appliances.
Though both policies protect your home, they cover different items. A home warranty covers systems and appliances in your home when they stop working due to normal wear and tear, whereas homeowners insurance is designed to protect you financially when your home suffers damage from a catastrophic event, such as a natural disaster or fire.
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