Is a home warranty right for you?

The idea of a home warranty can sound great. According to the National Association of Realtors, a home warranty is defined as, “a service contract, normally for one year, which helps protect home owners against the cost of unexpected covered repairs or replacement on their major systems and appliances that break down due to normal wear and tear. Coverage is for systems and appliances in good working order at the start of the contract.”

It sounds simple: You insure critical systems in the home, and should something go wrong with those systems, the cost of repairs is largely covered by the insurance company. And it’s true, a home warranty can give you exceptional value, especially in the first year of home ownership, when you’re still getting a feel for the overall health and maintenance status of your home.

Sellers often offer a home warranty to allay buyers’ concerns over their first year in the home. In fact, in states where foreclosures are common, home warranties are practically the norm. If a buyer likes two homes about the same, a warranty can be a competitive advantage.

But as with all insurance policies, the fine print matters. When researching home warranties, you must be certain of what the policy covers, and how the insurance company honors claims. For big ticket items like heating and cooling systems, the home warranty can be a massive cost savings, often reducing out-of-pocket expenses to less than 10% of the total. However, with smaller appliances and simple repairs, the claim can cost you as much as the repair would on its own. Plus, it’s vital to know if the warranty will replace versus repair aging appliances. (Many companies will try and repair an old stove or refrigerator rather than replace the unit with a more energy efficient model.)

You should also be aware when a home warranty isn’t required on certain home features. For instance, if you have a dishwasher or hot water heater that is already under manufacturer’s warranty, the home warranty coverage may be superfluous. If you have major systems with considerable age on them, though, the warranty can be worth the investment.

Be aware of the terms of the warranty when it comes to maintenance and neglect. Occasionally home warranty companies will try to get out of paying for repairs or replacement by claiming you haven’t kept up with routine maintenance issues. To ensure you don’t get caught out on these technicalities, understand how the insurance company justifies these claims.

Insurance is always a complex business, but don’t shy away from investigating a home warranty if you’d like some protection from major, catastrophic repairs. It all comes down to the terms of the contract, and with a little diligence you can get the coverage you need. If you have any questions about where to get home warranty quotes, get in touch with me today!

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