Much like owning a car, owning a home requires care and proper maintenance to make sure that it serves you well over a long period of time. One way to ensure that all the appliances and systems in your home are well maintained is to buy a home warranty. Having the right home warranty can give you the peace of mind that you need should unexpected repairs and replacements come around (as they tend to do).
However, as much as having a home warranty can be an excellent way to ensure that your home is well maintained, it’s not exactly something for everyone. There are those who might not find this kind of insurance to be the right fit. Looking critically at the pros and cons of paying for a home warranty could be one of the best ways to determine whether or not you should buy one.
What is a Home Warranty?
There are many different types of property insurance that all have their own merits and demerits. Whenever people hear about a home warranty, they immediately assume that it’s the same as home insurance. This isn’t the case. Home warranty and home insurance are not the same.
Home insurance is a more comprehensive cover that is meant to financially protect you in case your home is struck by some unforeseen catastrophe such as fire, flood or windstorm. These insurances tend to cover the structure as a whole.
A home warranty is designed to protect the major appliances and systems within your home. A typical home warranty will cover:
- Your electrical wiring
- Kitchen appliances
- Major electronics
The home warranty is supposed to help pay for repairs or completely replaces these systems and appliances when they do inevitably break due to normal wear and tear. For example, if your water heater breaks down because it’s old, your home warranty can either pay for its repair or replacement. You don’t need to have the entire amount in hand.
How Does a Home Warranty Work?
Like any other insurance policy, a home warranty requires you to pay a premium for every year you want your home covered. Typically, a home warranty plan costs anywhere between $200 – $600 depending on the size of your home and what you want to be covered. For a home that is about 5,000 feet in size, you can expect to pay for the standard cover. Anything above that will require additional coverage.
When undercover, you have the right to call the home warranty company whenever anything breaks in your home. Say for example your HVAC system breaks and requires a whopping $1,200 to repair or replace. You can call your company and have them send someone over to take care of it without it costing you the entire amount. Depending on your coverage, you may be required to pay a deductible every time the company sends someone out to carry out a repair or replacement job. The company often covers a huge percentage of the total costs thus saving you money in the process.
Home Warranty Pros
- It gives you awesome peace of mind: Most homes don’t have as much disposable income to finance an emergency fund. This means that they are constantly living on the edge. When something breaks in the house they have to scramble to find the money to repair or replace it. This sometimes comes to thousands of dollars. With a home warranty, you will have the peace of mind knowing that should anything break in your home, it’s covered by the warranty.
- Saves you money: Home repair costs can be very expensive. Something like your water heater can cost thousands of dollars to replace while your home warranty will only cost you about $600 a year and it covers more than just the water heater.
- It’s a good add-on if you want to sell your home: Including a home warranty plan will make your listing more appealing to buyers who aren’t sure about the systems and appliances in the home.
Home Warranty Cons:
- A warranty doesn’t cover everything: Not all your home systems and appliances are covered by your home warranty. You need to read the terms and conditions very carefully before signing the contract.
- The warranty won’t cover the full cost of repair or replacement: Even though your home warranty could cover a huge chunk of the costs associated with any repairs or replacements that occur during your cover, it doesn’t cover the full cost. For the most part, you will find that the warranty only covers up to 80% of the cost and you still have to pay a deductible with every call.
- It won’t cover items that aren’t properly maintained: Home warranties cover items and systems that break down naturally due to wear and tear. If your systems or appliances break down because you didn’t properly maintain them then you are on your own.
There is no doubt that any insurance of any kind of worth a second look but is a home warranty the right kind of cover for your home?