For many new homeowners, the term Home warranty can be little confusing. You might be asking yourself, for instance, what is it and how much it costs you. What are the Do’s and Don’ts of it and a lot of other questions.
Don’t worry—Homefics is here to make home warranties a little more understandable by answering some basic questions about In’s and Out’s of Home Warranties.
What is home Warranty?
Home Warranty has become common in real estate transactions for sellers to include a home warranty to close the deal and give buyers peace of mind about how expensive home systems or appliance repairs will be handled in the future. However, mortgage lenders don’t require you to buy a home warranty or maintain a policy. It is a service contract that covers the cost of repairs and replacements of many appliances and the systems in your home.
Home warranties operate under the same principal as extended car warranties. They cover some or all expenses related to certain items. A home warranty company will issue a policy to the home buyer for a set annual premium to repair or replace covered appliances and home systems needing repair or replacement. These are service contracts, not insurance policies, so unless you have a plan with covered technician visits you may have to pay a service fee in addition to your premiums to have someone visit your home and verify your claims.
What Does It Cover ?
It depends on the company and plan, but most home warranty companies offer coverage for mechanical systems like
- Electrical systems
- Heating and air conditioning systems
- Washers and dryers
- Kitchen appliances
As you can imagine, the comprehensiveness of your coverage will vary from company to company and plan to plan. That said, as a rule of thumb, home warranties don’t cover mechanical systems or home appliances that have been accidently misused, damaged on purpose, or maintained inadequately. Likewise, certain warranty companies won’t replace non-mechanical parts, such as handles or knobs.
If you have an old appliance you want it to get cover, you’ll need to consider if your old appliance has a paper trail of known conditions and see if your contract lists it as a covered item. These are just a couple of the things you’ll need to check to know for sure if you can cover it.
Don’t Assume Everything Is Covered
One of the biggest mistakes’ homeowners make is assuming warranty covers everything. For example, new homes in Alberta benefit from very comprehensive coverage during the first year – but this only applies to defects caused by product quality and workmanship. For instance, the builder may not replace your flooring for free if it’s been damaged by a water spill you didn’t clean up. Or, during the second year, your plumbing may not be covered if you forget to shut off your outside taps in the winter or if you repeatedly flush unnecessary objects down the toilet. While a good builder will be more than happy to go above and beyond to help you, there can be exceptions.
How much does a home warranty cost?
It’s hard to pin down exact costs because most home warranty companies prefer custom quotes to standard pricing. But it’s plans usually cost somewhere from $350 to $500 annually. Home warranty companies determine these prices by taking into account a variety of factors, like home size and what they call “loss history.” With loss history, companies typically factor in two main things: how likely a covered item is to break down and the average cost to repair or replace it.
On top of plan costs, homeowners usually pay a service fee that can cost anywhere between $50 and $75 per repair. This payment is made directly to the contractor who is dispatched to make assessments and repairs on your home. The good news is that this is a one-time payment. That your plan premium should cover all the rest of the costs associated with your claim.
Do I need to purchase a home warranty?
Home warranties can come in handy when integral mechanical systems or expensive appliances break down unexpectedly. And they can be especially helpful for new homeowners or prospective buyers with little or no accrued savings. In short, a good home warranty can help spread costs out a little bit.
By doing an informal cost-benefit analysis, you’ll be able to tell pretty quickly if paying an annual premium makes sense for you and your home.
Start by weighing potential repair costs versus average premium costs. You also may want to consider the age of your mechanical system or household appliance. And remember, as with any contract, the devil is in the details.
When should I get a home warranty plan?
You can purchase a home warranty at any time when you own a house. Many people buy them as part of their home purchase. While some builders provide a warranty, which generally covers structural defects such as drywall and roofs. Whether you’re buying a new or “new” home, check to see if the purchase includes a home warranty and if so, what it entails.
How Do Home Warranties Work?
How home warranty insurance works isn’t all that complicated. When your designated mechanical system or household appliance has problems, this is what should happen next.
1. You call your home warranty company.
2. Your home warranty company sends a contractor.
3. You pay the service fee to the contractor.
4. The contractor diagnoses the problem and gets your service approved by the home warranty company.
5. Your home warranty company pays the contractor.
How to Find a Reputable Company for Your Home Warranty?
It’s important to research home warranty companies online and read client reviews. Ask questions to verify the company is real, who will provide repair service (many national companies have local service providers). And whether you can get service 24/7 if something goes wrong.
All the best for home warranting you are all set to go for your successful planning towards securing your home appliances and other stuffs as well. Hopefully you find this blog helpful.