Nothing escapes the ravages of time, especially the mechanical and structural components of a home.  Eventually Father time comes calling or plain bad luck comes into play.  If you have ever owned a home, you are all too aware of this fact.  It would be great to have some assurance that you will have some help when the inevitable happens, as many items and systems within a home are quite expensive and our daily lives depend on their function.  

Home warranties have become part of many real estate transactions for this very reason.  For a new build, the builder typically has warranties for a certain timeframe to assure their buyers, but for a resale home this is not the case.  An aging home and the items in it can have buyers seeing a swirl of additional dollar signs when they consider, “How long until that dishwasher breaks?”  Purchasing a home warranty can ease the fear of your buyer and make a home sale more appealing.  If the seller does not purchase one, a buyer may want to do so themselves.  

A home warranty differs from your homeowner’s insurance, which is required by your lender. Homeowner’s insurance covers loss or damage from fire, water, wind or other covered events.  A home warranty is essentially a year-long service contract.  It will repair, and if necessary, replace items due to wear and tear.  Sounds too good to be true, right?  Here are some things to consider.

•    The initial cost is anywhere from $350-500/year for a basic contract (company and coverage dependent).  

o    Typically covers kitchen appliances, plumbing, water heater, furnace, sump pump, whirlpool tubs, ect.
o    Enhanced plans, which add to the basic cost, cover specified items such as pool/spa, washer/dryer, air conditioner, refrigerator, garage doors, septic, ect.

•    There is a service call charge each time a technician comes out to evaluate a claim.  This usually starts around $60 and the home owner is responsible for the charge.

o    If they determine the problem is not covered under your plan, you still pay the service call fee.
o    It may be cheaper to fix small items yourself.

•    If the technician determines the problem is due to improper or lack of maintenance, the home warranty will not cover the cost to fix the problem.  You still pay service call fee.

o    You may want to find out if items, such as the HVAC, had regular maintenance prior to the purchase of a home.  On that note, you should have regular maintenance performed on certain items in your home.  

•    You are required to use the home warranty company’s contracted technicians, whether you like them or not.

•    There is usually a maximum dollar amount covered.  If the repair or a replacement costs more than the maximum, you are responsible for the balance.  

o    If you have high end appliances or a furnace that fails, this can still cost you a lot.  Think of the home warranty as a coupon in this circumstance.

•    A home warranty can claim too much wear and tear or that an item was originally installed incorrectly and they won’t cover the item.  

Here is the take home message: A home warranty can save you money on repairs and replacements so long as the item has been maintained and installed properly.  Be sure to know what is covered in your contract and for what dollar amount.  Home Warranty companies get a lot of complaints because there is a misconception of what they do.  Many people are under the impression they are completely covered for all repair costs and full replacements under the warranty and when their claims are denied or fractionally covered, it can be extremely frustrating.

As with anything, fully vet the company.  In 32 states home warranty companies are required to be registered or licensed with the State Insurance Commission.  You can check their records with the State and their Better Business Bureau Rating.  Even if the home warranty is purchased for you by a seller, it is a good idea to educate yourself and be prepared to burden a portion of the repair/replacement cost.  Something is better than nothing and for small repairs, a home warranty can be very financially helpful.  

Thanks for reading.  I would love to hear your comments.