The Ins and Outs of Home Warranties

the-ins-and-outs-of-home-warranties

When you buy a home, you have the option to include a home warranty in the sale of the property, or purchase it after the deal closes. These warranties cover the repair or replacement of any mechanical systems or major appliances that come with the home and are good for a certain time period.

Depending on the age of the home you’re buying, sellers may include a home warranty in the sale as their promise that there’s nothing wrong with the home they’re selling. If something does happen after you take possession, the warranty may cover you financially.

Don’t Confuse Home Warranties With Homeowner’s Insurance

Coverage for components in the home that may break down sounds like homeowner’s insurance, doesn’t it? But despite their similar definitions, they are different. For starters, home warranties are optional, while insurance is necessary. Lenders require that a home is insured before a mortgage is even extended to a buyer. Insurance is also meant to cover major damage or loss associated with your home’s structure and your personal property that may be caused by theft, vandalism, flooding, fires, or other natural disasters.

On the other hand, home warranties typically cover appliances and systems that break down after normal wear and tear that doesn’t necessarily have to do with any type of major accident or natural disaster. 

With homeowner’s insurance, the cost of the policy depends on things such as your home’s age, construction, location, and your personal belongings. On the other hand, the cost of a standard home warranty in the same location is the same.

What is Covered With a Home Warranty?

Not all home warranties provide the same amount of coverage. Every home warranty policy and company is different. Having said that, basic coverage typically covers things like the furnace, air conditioner, plumbing system, and electrical system. However, coverage varies from one company to the next, so it’s important to look over the details of your contract. 

You can get additional coverage if you upgrade to a better plan, which will subsequently be more expensive. There are also add-on plans that you may be interested in that provide coverage for specific items. For instance, if you want components such as all your major appliances, central vacuum system, pool, hot tub, or irrigation system included, you can do so for an extra cost.

In order for your home warranty to ensure coverage, all the components that you want covered need to be in proper working order when the warranty goes into effect. If you’ve got an old appliance that you want to be covered under a home warranty, you need to have the associated paperwork detailing any known issues with it to make sure your contract covers it.

How Long Do Home Warranties Last?

The length of time that a home warranty lasts will depend on exactly what is being covered. Typically, components such as major appliances, drywall, paint, and stucco are covered for 12 months. Builder home warranties usually cover up to 10 years for structural issues, and two years for plumbing, electrical, and HVAC systems. Again, it’s important to look over your specific contract because plans vary from one company to the next.

You Need to Get Approved For Specific Work to Be Performed

If your home ever experiences a problem that’s covered under warranty, the home warranty company will decide if it’s covered under your plan, and will then send a contractor to your home to diagnose the problem. The contractor will then need to get approval from the home warranty company before making any necessary repairs.

Don’t Forget About the Deductible

While the home warranty company will pay for the repairs needed, you’re still on the hook for paying a deductible when you make a claim. The amount you pay will depend on your plan, but it typically falls within the $50 to $100 range per incident.

Coverage is Transferred to the Buyer if You Sell

If sell your home while the warranty is still in effect, whatever is left on the coverage will be transferred to the buyer. This can be an attractive feature on your listing. If you want to top up the coverage, you can add the difference at closing.

The same applies when you buy: if there is any remaining coverage on the warranty of the home you’re buying, it’ll be transferred over to you at the point of closing.

Should You Buy a Home Warranty?

If the home in question is fairly new, a home warranty might not necessarily be worth it, especially if you’re handy enough to tackle any repairs on your own. On the other hand, if the home is older and you don’t have the home repair skills nor the desire to be responsible for making any repairs, a warranty might be worth investing in. Your decision to buy a home warranty or not will ultimately come down to your ability take care of the repair work on your own and the likelihood of anything breaking down in the near future.

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