Home Warranty – Is it Worth It?
A home warranty is a type of insurance that many homeowners should consider. To get a decent value for purchasing a fairly new home, this type of insurance is very important. Read the home warranty contract extremely carefully and make sure you are buying a home warranty from a very reputable company.
The benefits are that the shared contributions of the people who pay home warranty insurance payments cover the smaller percentage of those homeowners who have problems. That being said, if your home is older, you will not qualify for a home warranty. The only homes that can get this insurance coverage are the newer ones. They also need to have a certified home inspection that checks all the systems in the home for perfect functionality.
In the home inspection process, if the inspector notices a serious problem with any system they must, by law, report it to the potential purchasers and the sellers, in the form of a written report. They can lose their license to do home inspections if they do not truthfully reveal what they discover. Additionally, if the seller of the home knows about a serious problem, they must disclose this to the potential buyers. This is not necessarily a deal killer because the parties can adjust their positions/offers to accommodate the bad news.
For example, if the inspector checks to see if the air-conditioning system works and it starts up but does not push cold air into the vents, something is wrong. A replacement of a central air-conditioning unit for a 2,000 square foot home is about $5,000. A potential buyer will not get a home warranty company to cover a broken system. To try to do this without disclosure of the real circumstances is an illegal act of fraud. The remedy is to reduce the sales price for the buyer of the home according to the cost of making the repairs.
On the other hand, sometimes problems just happen without warning. This is exactly the circumstances when having a good quality home insurance warranty policy will come in handy. Many problems like this come up without warning. For example, an installed microwave suddenly stops working or a washer or dryer goes out. The air-conditioning system stops or the furnace breaks.
Professionals who work in these repair/maintenance fields charge very high rates per hour and a minimum rate simply to visit the property to determine what is wrong. Additionally, they charge for the repair parts or for the new system needed and for the labor to install the new parts or the new system. This can be very expensive.
Simple problems can easily mount up to thousands of dollars in unexpected expenses. Most home warranty programs cost $500 to $700 per year. The policies have limits of what they will cover, but a single major repair that has insurance coverage will usually exceed the cost of the home warranty policy.
Summary
What a homeowner is actually getting when they acquire a new property and buy home warranty insurance as well, is peace of mind. While not all things are covered and the “devil is in the details,” there are some really good home warranty companies that are worth consideration.
The good news for the home warranty insurance company and for the new homeowner is that if you get the home warranty insurance and pay for it, and nothing goes wrong you do not have a major expense. The insurance companies make money to help others with unexpected problems. When looking at home warranty insurance in this way, even if you lose (pay home warranty premiums without needing to make an insurance claim) you still win and the insurance companies win also.
If something does go wrong in the first years after you buy a fairly new property, you will be so thankful you made the smart decision to buy a home warranty insurance policy to help pay for the needed repairs that are unexpected.