Determining When A Home Warranty Is Worth The Cost
The offer of a warranty after a big purchase can usually bring about one of two reactions: relief at the opportunity to protect your investment, or scorn at the thought of wasting money on something unnecessary. Whatever your feelings are on warranties though, a home warranty is something that should be considered carefully and with an open mind.
Whether you are a recent homebuyer or a veteran homeowner, you will always have the option to purchase a home warranty,
a renewable service contract, usually lasting 12 months, that pays at least a portion of the costs to repair or replace covered items in your home. Many warranties cover standard appliances and mechanical systems, but the specific items varying by contract and company.
How do you know if you need a home warranty or if it would just be a waste? Heres a guide to help you determine if a home warranty is right for you:
What A Home Warranty Covers
As mentioned above, the items covered in a home warranty will differ depending on the policy and company. For the most part though, a home warranty generally covers:
- Washers and dryers
- Garbage disposals
- Heating and cooling units
- Electrical systems
- Telephone wiring
- Roof leaks
Read over a warranty policy carefully to see exactly what is covered and if there are any requirements or restrictions for certain coverages. For example, out of date systems, like an old furnace that isnt up to code, will most likely not be covered.
The Difference Between A Home Warranty and Home Insurance
In order to determine if a home warranty is worth getting, its important to know how it differs from home insurance. While the two may seem similar, they actually work in conjunction with each other.
A home warranty will cover the cost to repair or replace a covered appliance or mechanical system, where as home insurance will pay the cost of repairing the damages done by a covered cause. If a pipe bursts and ruins your hardwood floor, for example, your warranty will pay for a plumber to fix the pipe, while your insurance will cover the cost to replace your floor.
SEE ALSO: What Is Covered By Basic Home Insurance?
What A Home Warranty Costs
Depending on the coverage and the company, a basic warranty averages around $250 to $500, with added protection costing around $100 to $300 more. There are sometimes discounts and sales being offered, of course, so its good to shop around for the company with the best deal
. In addition to the premium, however, companies usually charge a fee for a service call on each claim.
The Positives Of A Home Warranty
Like insurance, the main benefit of a home warranty is the protection.
You get peace of mind knowing that should anything happen, you will be covered. This is especially valuable for the not-so-handy homeowners who dont want the inconvenience of having to find a repairman when something goes wrong, or for those who have top of the line, expensive appliances and systems that would cost an arm and a leg to replace.
Home warranties are also good for first time homeowners who are still learning the ins and outs of maintaining a home,
since it provides a hassle-free connection with repairmen and services they havent dealt with yet.
The Negatives of A Home Warranty
A big negative people focus on is the fact that, more often than not, a home warranty isnt needed.
A home can go years without anything breaking, or only needing minor, easily fixed repairs. Additionally, some warranty companies may exclude certain appliances or those past a specific age, and few will cover improperly maintained systems at all.
Another drawback of a home warranty is the lack of choice
in selecting the repairman or contractor that will fix your broken appliance or system, or the model and brand that will replace it. Also, warranties often come with price limits for each repair every contract period.
The Bottom Line
It is not uncommon for the seller of the home or a real estate agent to cover the first 12-month period of a home warranty as an incentive or gift, but renewing the contract is entirely up to the homebuyer. Weigh the cost and benefits of the warranty coverage against the cost of repairs without the warranty.
If you would rather save your money for something you feel is more necessary, thats fine. But if you do decide that a warranty is a must for you, shop around for the best prices and remember to read each policy carefully.
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