Home Warranty

All About The Home Warranty

A home warranty is contract for service that protects the homeowner from bearing the entire cost of expensive repairs. Generally, the agreement covers the repair or replacement of major kitchen appliances and home system components, including water heaters, washers and dryers, heating and air-conditioning parts, plumbing, and electrical. All home warranties are different. Even when I sell my own home in Minnesota, I research home warranty companies and their associated coverage. 

Home Warranties Provide Peace of Mind

Imagine you just purchased a home. After your down payment, closing costs, and moving expenses, you are short of cash. A couple of weeks later, the washing machine stops working. Since you have a Home Warranty, the repair or replacement is usually covered. So, in addition to being a service contract, a home warranty is peace of mind. It can be especially beneficial to a first-time homebuyer in MN

Home Warranties are Different than Homeowners Insurance

What a Home Warranty is not, is insurance. Homeowners insurance will cover your home in the case of damage by fire or weather conditions. Still, it's not going to pay for a new dishwasher if yours gives out. You might say that a home warranty takes over where your insurance leaves off. It covers normal wear and tear and breakdowns.

How a Home Warranty Works

Home Warranty companies have service technicians and subcontractors they work with who are licensed, vetted, and screened. When your air conditioner breaks down, you give them a call, and they send someone out to take a look at the problem provided that appliance is covered in the warranty. You pay a service charge that is spelled out in the contract, and the home warranty company pays the remainder of the bill to either repair or replace your appliance.

Home Warranty Cost

Prices for a home warranty vary depending on what is covered and how much they pay versus what you kick in for service calls. Generally, they start at $400 per year and may go as high as $700 or more for a plan. Service fees can range between $75 and $125.

Home Warranty – the Pros

For home buyers, the main advantage of buying a home warranty is peace of mind against unforeseen repairs and replacements that will put you in a financial bind. For first-time homebuyers that may be short of cash after closing on their new home, it can be especially beneficial.

Another advantage is the warranty removes the burden of having to find and screen a contractor for a service call. Also, a large portion of a technician's business may come from the warranty company, which is a substantial motivation to do a good job.

If you are the new owner of a second home or vacation property that is a distance from your home base, a warranty may be the way to go. When you are not familiar with the area, and who to call when you need service, you can rely on the warranty company to get someone out to handle the situation.

If you are purchasing an older home with appliances and system components near the end of their life cycle, a home warranty makes a lot of sense. It could end up being the best investment in your serenity for the entire year, and your budget may thank you as well.

For anyone selling their property, a home warranty is an excellent marketing tool you can use to entice a buyer. Additionally, even though a seller may be honest on the disclosure form, appliance and component failures and mishaps can happen. The warranty is another layer of protection to the seller.

Home Warranty – the Cons

The home warranty has some gray areas. For instance, most of them require that the homeowner perform proper and timely maintenance of appliances and systems that are covered. This often provides an out for unscrupulous companies to wriggle out of paying claims.

Some home warranties place limits on the number of service calls you are allowed. Also, there may be dollar caps on the payouts, so you need to do your homework and read the contracts carefully before you purchase one.

A home warranty may limit your choices. When an appliance needs to be replaced, you may not have the option to choose one yourself. Not having the option of selecting your own service person could prove to be a liability if you have a conflict or are not satisfied with the quality of the workmanship.

Is a Home Warranty Worth It?

Make no mistake, home warranties are not inexpensive. At times they turn out to be more trouble than they are worth. They could also end up saving you thousands of dollars at the end of the year.

At the end of the day, it all depends on the individual homeowner. If you are handy and enjoy doing home improvements and repairs, that will limit the number of times you would need to use the warranty.

If you have an emergency fund, you are financially prepared for unexpected breakdowns and failures. It may make more sense to throw the cost of the home warranty directly into your emergency fund and take a pass.

When purchasing a new home, you probably do not need a home warranty as one will be provided by the builder. For instance, In Minnesota, a new home must have a 1-year warranty on the entire home, a 2-year warranty on all of the systems and a 10-year warranty for the structure. Even if the appliances are not covered, they will all be new and come with their own warranty from the manufacturer.

Are All Home Warranty Companies the Same?

Simple answer: no. Do your research. Check companies online. Ferret out online reviews. Ask your friends and family for recommendations. Check the Better Business Bureau. Lastly, read the contract carefully and know precisely what is covered, how it's covered, and how much choice you will have in the process.

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