Once you have finally moved into your brand new home, you may put in some significant effort to make it look like your dream come true. There is nothing you will not do to protect your home, and which is why you may also invest in a homeowner’s insurance. In a recent survey, approximately 95 percent of US homeowners said that they had homeowners insurance.
Home insurance offers protection against damages due to fire, theft, lightning, and vandalism. But what happens when there is something wrong with your plumbing system or your oven stops working? This is where the home warranty comes in.
In the United States, home warranty is defined as a contractual agreement between the homeowner and a home warranty company or a risk management business. This contract covers some major home components such as air conditioning, the electrical system, and the plumbing, and offers you discounted replacement and repair service.
According to the National Home Service Contract Association, a non-profit organization comprised of home service providers, there has been an 8 percent growth in the number of home warranties sold in 2015. The President of NHSCA, Mike Bartosch, stated, “The wholesale value of these contracts easily exceeds $1 billion in savings to consumers annually”. Home warranties have become quite popular because they help save a lot of your hard-earned dollars.
Home warranties generally cost a few hundred dollars and these contracts last for a duration of one year. Worry not, if you like the services offered by the particular home warranty business, you can easily renew your contract. However, when you are signing any home warranty contract, it becomes extremely important to read the fine print and check what all is covered by it. After all, you should not end up paying a lot of money for a contract that barely covers anything.
Things Covered by a Home Warranty
There is a difference between home warranty basic coverage and advanced coverage. The average cost of the basic home warranty coverage is somewhere between $350 and $500 per year. Some of the things that are included in the basic coverage are:
- Hot water pump
- Built-in microwave
- Ceiling fans
- Plumbing systems and stoppages
- Smoke detectors
- Electrical and telephone systems
- Garbage disposal
- Central heating system
- Sump pump
Just by paying around $100-$200 more, you can get the home warranty advanced cover, which includes damage to items such as:
- Air conditioner
- Garage door
Some companies also offer to cover your pool, septic system, well pump, as well as the freezer. Before you go ahead and buy a home warranty, get someone to inspect your home and check if this warranty is needed. There are a number of home warranty companies in the US that clearly state that existing damages will not be covered by them.
Factors to Keep in Mind while Buying a Home Warranty
Sometimes, in newly built homes, the cost of home warranty is actually included in the price of the home itself. These warranties are given by the homebuilders and the duration for the warranty is different for different things. For example, while they offer you a 10-year warranty on the structural defects, you will only enjoy a six month warranty on the appliances.
When it comes to existing homes, it is either the real estate agent or the home seller that pays for the home warranty. As per Carl Knighten, the CEO of HMS Tri-Region – a home warranty company, less than 1 percent of his home warranty business comes from the homeowners directly.
Here are a few things you need to know before buying a home warranty.
- When you make a claim, you will have to pay a deductible
Depending upon your home warranty company and policy, you will have to pay anywhere between $50 and $75 for every incident that you report. For example, if you are facing electrical problem and plumbing issues on the same day, you may be still charged for them as two separate incidents.
- You cannot choose the person who comes for the repair work
When you need some carpentry work done in the house, you would choose a carpenter whose work you have liked before. However, when it comes to home warranties, the choice of selecting the contractor or skilled professional is taken out of your hand. The companies will only send those contractors with whom they already have a connection with.
Is a Home Warranty Worth it?
Ideally you should think about getting a home warranty, if your home is more than 10 years old. Chances are that your original systems such as the plumbing and the furnace, may have already started malfunctioning or showing some wear and tear. Acquiring a home warranty ensures that you do not end up paying a hefty amount for maintenance.
If your home is brand new, make sure that you have read all the fine print on the contract before signing it. See to it that the home warranty covers all the things that you want to get cover for before committing to it.