Tuesday, 27 June 2017

Frequently Asked Questions about Home Warranties

Written by Posted On Wednesday, 15 March 2017 17:14

First time homebuyers are faced with a steep learning curve. From selecting a realtor to understanding mortgage options, there's so much to consider. One topic that is often misunderstood is the home warranty. The primer below addresses a few common questions about home warranties and explains some of the pros and cons.

What is a home warranty?

A home warranty is a service agreement that protects home owners from having to pay out of pocket for costly repairs or replacement of specific home systems and appliances. It may also be referred to as a home protection plan, or in the case of new homes, a builder’s warranty.

What does a home warranty cover?

It varies by plan, but items typically available for coverage including major systems such as heating and air conditioning (HVAC), plumbing and sewage, electrical systems and the roof, as well as household appliances including kitchen appliances and washers and dryers.

Is a home warranty the same as home insurance?

No. A home warranty helps with repairs or replacements due to normal wear and tear. A home insurance policy covers damage to your home and your belongings due to theft, fire or natural disasters.

What is the length of a home warranty?

The typical home warranty length is one-year, renewable on an annual basis. Newly built homes usually come with a builder’s warranty that includes coverage of varying lengths, such as one-year coverage on defective workmanship, two-year coverage on major systems, and 10-year coverage on structural components.

How does a home warranty work?

If a problem occurs with a system or appliance covered under the warranty, you must contact the warranty provider who will send a preferred service provider to investigate and make the repair. Most plans won’t cover the repair or replacement if you bring in your own repair person, so be sure to contact the warranty provider first.

How much does a home warranty cost?

The cost varies depending on what is covered, but you can plan to spend at least $300 for a basic home warranty, and as much as $800 for more advanced home warranties. Most plans also charge a service fee or deductible, which could be as much as $125 per visit.

Are home warranties transferrable?

If you’re selling your home and still have a time left on the warranty, it can be an enticement to buyers if the warranty is transferred to their name. Whether or not it is transferrable varies by warranty company and even type of warranty (for example, some builder’s warranties only apply to the original owner and are not transferrable). If you’re buying a home with a warranty, be sure to read the fine print to find out if it is transferrable.

How do I get a home warranty?

If you are buying a brand new home, a warranty will likely be included (but be sure to review it to make sure you understand what it covers). If you’re buying an existing home, ask if a warranty is included or if the seller would be willing to purchase one to sweeten the deal. You can also purchase a home warranty yourself for a home you are buying or one you already own. Just be sure to do your research as there are many different companies who offer home warranties.

Is a home warranty worth it?

As with every question of substance, the answer is “it depends.” Home warranties can give you peace of mind, especially if you don’t have the means to pay for large, unexpected repairs. They can also be helpful if you just want to pick up the phone when something goes wrong and not have to research repair services.

If you are buying a brand new home, the warranty is usually a no-brainer because it is included (and you would be surprised how often new homes have issues that the warranty covers).
If you’re buying an existing home and the seller is offering a warranty, it could be better than nothing. Then again, you may not have the option to choose what type of warranty you get or which provider is used.

If you’re buying the warranty yourself, you’ll want to consider the age of the home’s major systems and whether or not they are close to end of life. You’ll also want to know if the seller (and any previous owners) properly maintained the systems, which can be difficult to discern unless the seller has detailed maintenance records. A home inspector should also be able to tell if the systems were maintained. Keep in mind that home warranties only cover normal wear and tear and many providers will not cover a claim if the system in question has not been properly maintained.

You can see there is quite a bit to consider when it comes to home warranties. If you’re buying a home or thinking about getting a warranty for your existing home, be sure to do your research to make sure it will provide the benefits you’re expecting.

This article originally appeared on the Housefax blog

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