A home warranty, sometimes called a residential service contract, is a service plan that provides discounted repair and replacement service on systems and appliances in your home. The contract usually last for a year.
It covers only things stated in the contract. Many homeowners use it to secure appliances and systems not covered by home insurance or a manufacturerโs warranty.
How does a home warranty work?
The major value of home warranties lies in the convenience of getting your appliances and systems fixed with ease.
If they develop any fault, you file a claim with the warranty provider, and they will send a vetted service person over to your home. This saves you the stress of searching for a competent repairman in your area.
Do you need a home warranty?
You may not need a home warranty if your home appliances and systems are new, provided the manufacturersโ warranties are still active.
Instead, it is a good investment if the appliances and systems are old but not to the extent they are due for replacement.
Types of home warranty
There are three major types of home warranty for buyers, which you can choose from depending on your need:
- Systems plans: These usually cover major home systems, including HVAC, water heaters, electrical, plumbing, smoke detectors, and garbage disposals.
- Appliance plans: They cover appliances like ovens, stoves, dryers, garage door openers, and refrigerators, among others.
- Combination plans: Any of such plans will cater to both systems and appliances. Some companies also offer the option to customize the plan, whereby you choose certain things you prefer to be included. This can either reduce the cost or increase it, depending on the things you include.
Kinds of home warranties
Generally, there are two kinds of home warranties based on who is paying for it.
Sellers home warranty
Sellers home warranty can protect the seller from incurring costly financial expenses while the home is listed or under contract. It offers benefits for both seller and buyer.
If, during the home inspection, the buyer detects any issues with the appliances or systems, the sellerโs home warranty may cover the repair.
Buyers home warranty
It is usually recommended for new homeowners, especially first-time buyers. The buyer’s home warranty will help to limit out-of-pocket expenses for repairs and replacements around the home.
This service significantly decreases post-sale liability.
Cost of home warranty
You can pay monthly or annually if the home warranty is not part of the homeโs purchase agreement. Mostly, annual payment comes with a discount.
A home warranty plan costs about $50 per month and $600 per year on average. Also, depending on the service provider, you may be allowed to add additional coverages, such as septic or roofing coverage. This may cost between $30 to $40.
Advantages of home warranties
Peace of mind
Unless you choose wrong, with a home warranty, you can comfortably open a ticket with the service provider to request repair of appliances or systems covered by the plan.
You can be assured of a prompt response and quick fix of the issue. The reverse may be the case if you had to hunt for a professional technician for the repair.
Since the company vets the repairmen, you can be assured they are of good manners instead of hiring a random technician because of urgency.
Safety
Systems such as electrical, if not fixed in due time, can be dangerous. Likewise, a smoke detector.
A home warranty saves the need to suspend the repair for later, probably because of time or budget.
Budget-friendly
The labor cost for repairing the electrical issue is about $300 without considering the cost of materials if needed.
Septic issues can cost almost $1,500 to fix, while water heater repair averages $571. Imagine having to repair any or all of these twice in a year.
Meanwhile, the average cost of a home warranty is only $600.
Things to consider when choosing a home warranty
Service Agreements
Service Agreements, also called home warranty plans, indicate what the contract covers and under which conditions. Choose the plan most suitable for your need.
For example, your refrigerator might be new and still covered by the manufacturerโs warranty, whereas your oven is older. Purchasing a home warranty plan that does not include often but instead covers the refrigerator may not be a good decision.
Licenses and certifications
Home warranty companies are regulated and require licenses and certain certifications to operate. Confirm if the firm you are considering is licensed.
Also, ensure their technicians are licensed and insured.
Price
Compare service agreements and prices before buying a home warranty. Sometimes, an expensive plan does not offer superior coverage in the real sense. Likewise, you should reconsider if a price is too good to be true.
