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Answering all those burning questions you didn’t know you had about home ownership.

Home Warranty: Do You Feel Lucky?

Picture of Jessica Dabkowski

Jessica Dabkowski

Helping you with all things homeownership!

As a homeowner, you just never know when you will face unexpected and costly repairs for your home.  A home warranty can sound like a great solution to this dilemma, but is it really worth it?

Home warranties have gotten a bad rap in the past, but like any warranty or insurance policy, the upfront cost could be worth it in the end if the policy meets your needs.

What is a home warranty?

A home warranty is a policy purchased through a home warranty program covering your home’s main systems or appliances for repairs. 

A home warranty is different from your homeowner’s insurance or a manufacturer’s warranty on a product.  The home warranty may cover the labor to fix a failed part on a product that your manufacturer’s warranty or home insurance does not cover.  For example, it will pay the plumber to fix a broken pipe, but not cover the damage to your home that resulted from the ensuing flood. Home insurance covers unforeseen damage and catastrophes, whereas a warranty fixes a part that breaks before its time.

Therefore, a home warranty can work hand-in-hand with other home policies when something goes wrong.

What are the typical home systems covered and cost?

Policies typically cover HVAC, water heater, plumbing, built-in appliances such as refrigerator or dish washer, and for an additional fee, you can often add “extras” such as a swimming pool systems.

One year of coverage typically costs $400-600 with a $100 deductible when you make a service call.

Who can purchase a home warranty? 

Good news here – many home warranty companies will allow a homeowner to purchase a policy at ANY TIME!  This is an improvement since historically these had to be purchased around the time you bought your home.

What do consumers need to know before they buy?

You MUST read over the fine print of your contract and understand what is covered and what is excluded.  (Raise your hand if you are surprised I said that…no takers?) 

Here are some typical clauses to be aware of for standard packages:

  • Covers repairs on large systems (heating or air conditioning) but does not always cover replacements. Typically, it will help keep your existing appliances functioning and in working order.
  • Will not cover if repair if caused by lack of maintenance by the homeowner; typically covers “normal wear and tear” of an item.
  • May not cover certain items – i.e., may cover refrigerator repairs but not the ice maker (which is interesting to me because most often that seems to be the item needing repair).
  • Does not cover items once they reach a certain age or beyond its serviceable life (i.e. when your fridge is older than your high schooler).
  • Does not cover pre-existing conditions – items need to be properly installed, maintained, and in good working condition when you apply for the warranty.
  • Does not typically cover roofs and exterior items on your home.

What happens when I need to have something repaired?

A home warranty company requires you to contact them first when something breaks. The company will contact their service provider to send to your home and will pay the service provider directly once the claim is approved.

You do not control who shows up to repair an appliance or major system. That can be a major downside to some homeowners, especially if they have to wait a long time for a repair.  If you call a service provider without contacting the warranty company first, the company may not cover the repair, so don’t be a cowboy in this scenario.

What if something is not covered when I thought it was?

Like any warranty for any other type of purchase, there are times the warranty company can choose not to cover something. That is why you need to read the fine print carefully!

What do I look for in a home warranty company?

It is important to find a reputable company that has been awarded lots of good reviews by others. I recommend you:

  • Investigate the company’s long-term history and Better Business Bureau information.
  • Compare coverage levels and upgrades to standard packages along with deductibles and service fees.
  • Read the fine print in the contract to understand any co-pays and exclusions.
  • Understand your options if you decide you want to cancel the contract.

How do I decide if I need one?

There’s no easy answer here because when you get right down to it, this decision is about your own personal risk tolerance.  

Many, many years ago, my husband and I decided that we would waive all extended-type warranties. Our mental calculations (okay, his mental calculations) determined that if something were to break the money we had saved over the years evened out with what we would spend to fix it.  (Our one exception is the family iPad because, well, we have a 5-year-old and that is a whole different risk profile).

If you are the type of person who lies awake at night wondering what will happen if a major system in your house goes down, then a home warranty might be for you.  In that case, just do your homework and choose a reputable company.  The internet is full of reviews that can help you decide.  You can rest easy knowing you are covered.  

In the days of yore, when the market was not chock full of insanity, home warranties used to be a common bargaining chip for buyers when they negotiated a sale.  Don’t worry, grasshopper, the fire burning in this market can’t last forever, but in the meantime, buyers will probably be footing the bill for their own warranty.

As always, reach out to me if you have any questions.  This is Tim “the Tool Man” Taylor, signing off until next week.

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