5 Questions when Buying a Home Warranty

Written by Posted On Saturday, 26 May 2018 08:35
Home Warranties Are A Serious Matter Home Warranties Are A Serious Matter Brett Neilson

You may have done your due diligence when buying a home, but there is often that nagging sense that you missed something which could impact your pocketbook down the line. Maybe you did not check the boiler thoroughly enough, or perhaps something is wrong with the pipes.

To help assuage those fears, home warranty companies will approach you and claim that for a few hundred dollars a year, they will help cover the costs of breakdowns which can cost thousands of dollars. While this may sound like a good idea, all too often homeowners find out that the warranty policy pays out less than expected or does not cover certain, specific repair jobs.

This does not mean that you should eschew buying a warranty. But when buying a policy, it is critical to ask key questions to determine whether a home warranty is right for your home. Here are some of the most important things to remember to get the most protection for your dollar.

  1. Is Homeowners Insurance enough?

Homeowners insurance and a home warranty are not the same thing. As the warranty company American Home Shield explains, homeowners insurance covers natural disasters which threaten the home structure itself and your personal possessions. Home warranties cover the components inside the home such as the dishwasher or lighting system and help ease the cost of repair.

This means that there are instances where you should purchase insurance and not a warranty. For example, a new home with new devices is less likely to break down, and said devices are often covered by the manufacturer’s warranty which can be extended. Some home insurance policies come with package endorsements which add warranty features, letting you handle insurance and warranty issues in the same place.  

  1. What is the Price?

As noted above, most home warranties charge a few hundred dollars a year, with more expensive plans covering more features. But unlike a warranty for a laptop, homeowners can face additional charges or burdens.

For example, home warranties will often force you to use a repair service provider which is contracted with the warranty company instead of one you like. This can be a good thing given that it means that you do not have to spend time researching which service provider is the best, but you may prefer the freedom of choice.

Furthermore, the warranty may not cover the entire costs, forcing you to pay a deductible like health insurance. And there are limits to how much a warranty will pay out over any given period. Take time to read over any potential home warranty and figure out the answer to these potential problems.

  1. Do you understand your Coverage?

Home warranties companies have a poor reputation, with Angie’s List noting that they are one of the most complained-about services. This is why people need to check good home warranty reviews. But a great deal of these complaints occur because customers did not do their homework and failed to understand what the warranty covers and its limitations.

Unsurprisingly, these companies will try to avoid paying out whenever possible. Consumer Reports notes that home warranty companies will deny claims because a customer cannot prove that a broken item was not maintained properly, or because the problem was pre-existing. Home warranty policies can also be very specific about what they cover, such as covering the refrigerator but not the icemaker.

Homeowners must go over the details of any warranty with a fine-toothed comb, so that they know exactly what they will be charged and what is covered. The alternative is to discover that your warranty is deficient right when you need it most.

  1. What are the alternatives?

Homeowners buy warranties because the policies offer a sense of security against home components breaking down. But they are not the only way to help cover yourself for home repairs, and those alternative options may be better.

The simplest alternative is to take the money which you would have spent on a warranty and put it into a repair fund. Since you should not be repairing your home very often, a repair fund can let you slowly accumulate the needed funds and earn interest. By setting up a small cushion, you know that you have the money needed for a repairs instead of dealing with a warranty which may deny you your claim.

  1. Is a home warranty worth it?

This is a question which you will have to answer yourself. Home warranties do have major drawbacks and you may be better off investing the money in a repair fund or savings account. But on the other hand, there is peace in mind in letting a warranty company take care of home repairs.

If you like to do DIY projects, have contractors which you trust, and have an older home where appliances may not have been properly maintained by the previous owner, then you should probably not get a warranty. But if that is not the case, a warranty can be a good idea if you shop around and pay careful attention to the warranty’s coverage and costs.

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