Home Warranty Pros and Cons
You recently purchased a new home and now you have a plumbing problem. You remember the home came with a home warranty. But how exactly does this work? Will everything be covered? Is the repair company a reputable one?
It is important to start with a clear understanding of what exactly a home warranty is — and what it isn't.
Home warranties are plans that pays for repairs and sometimes replacements of household appliances and systems — things like dishwashers, plumbing, furnaces and air conditioning. Some may even cover the refrigerator, washing machine and dryer. It's a type of service plan: When you run into problems, you call the warranty provider and it facilitates getting things back in proper working order. Not to be confused with your homeowners policy, which provides insurance coverage for the damage or destruction of your home and its contents.
As a new home buyer, it's common for the sellers throw in a one year home warranty to sweeten the deal. Some buyers will even make this part of the negotiations to help with any unforeseen repairs. If one is provided to you, you'll eventually need to decide whether you want to keep it and pay the cost yourself. If one isn't provided to you, you'll be barraged with solicitations to buy one. Knowing the pros and cons will help you make the best decision for your situation.
Peace of mind.
Every homeowner dreads having to shell out a lot of money on a major repair. For example, installing a new air conditioner compressor could cost thousands.
That's especially true if you're a new homeowner who just depleted your cash balances to close on the sale. A home warranty gives you an opportunity to push some of that major repair risk over to a warranty provider.
When something breaks down around the house, your first job is to decide who to call to fix it. With a home warranty, you get to skip that step. Rather than researching your options and getting competing quotes, you simply call the warranty service company and they make the decisions about who will take care of your problem.
Service call fees.
Though home warranties can cover a lot of repair expense, they don't cover all of it. Typically, every time an incident happens, you'll need to pay a service call fee anywhere between $45 to $125 and up. If more than one type of technician is needed for a given repair, you may have to pay that fee to each of them. Typically this cost is more than the contractors service fee if you were to call them directly.
Home warranties are only valuable to the extent that they actually cover the repair or replacement you need. Some things may be covered as standard features, but others — for example, sewer line replacement — may be outside the bounds of the coverage, or require an extra fee for the extra protection.
Even if a given feature of your home is covered, your warranty claim might be denied if that feature hasn't been properly maintained. If you're the new owner of a home with a 10-year-old air conditioning unit that was neglected by the last owner, the warranty may be worthless when it conks out.
Some policies have covered amount limitations. If you have an older home, make sure to find out if there's a limit to how much a home warranty will pay per incident. Also, check for information about code upgrades — if your water heater goes out and you need to bring the system up to new code standards, the costs could be significant. A home warranty may have limitations on the amount it'll cover, or it may not cover it at all.
A warranty is only as good as the company that stands behind it. While some homeowners find their warranty providers are responsive and professional, others are disappointed with the speed and quality of the work.
While turning over decision-making about how to repair your home takes some work off your shoulders, it also means that you have much less control over how repairs are done, who does them and which brands get used when replacing things.
If you have a newer home and keep a cash reserve on hand for home maintenance, you may decide to skip the home warranty. Consider the yearly cost of the home warranty against the likelihood that a major repair would occur to help guide your decision.