When Getting a Home Warranty Makes Sense

Are you one of those homeowners who has nightmares about a crippled heating system? Maybe you’re thinking of buying a house, but you’re worried about all the components that could break.

If either of these describes you – or even if you’re somewhere in the middle – you might want to consider a home warranty. It’s a protection plan that helps homeowners deal with crises big and small.

Home warranties are very specific documents. Before you decide if one is right for you, you should understand what they do — and don’t – include.

Home Warranty Basics

A home warranty is a service contract, not an insurance policy. A warranty won’t protect against theft, fire or flood damage. The policy only kicks in when something goes wrong with an item covered in the contract.

Warranties are usually in place for a year, and renewing is an option. Policies for brand new homes often come with additional years of coverage for structural components.

Coverage typically includes most large kitchen appliances (such as an oven), sump pump, water heater, ceiling fans, and parts of heating and electrical systems. Extra coverage is often available for refrigerators, washers and dryers, swimming pools and septic systems.

A policyholder calls the warranty company when there’s a problem. The company then sends out a technician who’s under contract. Homeowners don’t have free reign to choose service providers.

With a warranty, the emphasis is on fixing the problem, not replacing the malfunctioning unit. Homeowners must pay a $50 to $75 service fee each time a technician shows up. The policy itself costs between $350 and $500, and enhanced policies tack on an extra hundred dollars or more.

An important note: Home warranties usually don’t apply if there’s a preexisting problem or an improperly maintained device. These exceptions are stated within the contracts.

It’s important for homeowners to be familiar with their home warranties, so be sure to read it carefully and completely. Frustration and disappointment are common when people make assumptions about what’s covered.

Home Warranties for New Homes

If you’re buying a brand new home, a warranty could be very helpful. There are variations, but often there’s a builder’s limited warranty and a limited warranty on certain structural components.

The builder’s warranty focuses on workmanship and materials. This covers many of the small but annoying problems new homes sometimes face, like squeaky floors and nail pops.

A new home’s systems should be in great running order. To be on the safe side, its warranty includes components such as HVAC ductwork, electrical wiring and the septic system. Structural warranties handle issues such as cracks in concrete floors.

Some lenders, including the FHA (Federal Housing Administration) and VA (United States Department of Veterans Affairs), mandate specific requirements for home warranties. If your financing institution has such rules, be sure the warranty companies you check out fit the bill.

Home Warranties on a House for Sale

It may seem strange to buy a warranty when you’re putting your home on the market. However, home sellers discover that a warranty performs a double duty.

The warranty could protect the seller from costly repair work on their older appliances. Who wants the expense of a new water heater, especially when you won’t be around to enjoy the benefits?

If a warranty can be transferred to the buyer, it’s a good selling point. In some regions, such as in California, it’s common practice to offer a warranty during a home sale.

Lucky homebuyers receive warranties as gifts from their real estate agents. That’s a pretty nice “thanks for choosing me.”

Home Warranty Extension

Buyers who purchase older houses that come with warranties sometimes choose to extend those contracts when the original period is over. They appreciate having a go-to number to call at any time, at any hour.

Emergency services are generally available, even after hours. If your crisis happens late at night or on a weekend, you know someone will show up – as long as the problem is covered under the warranty.

Home Warranty Peace of Mind

Home warranties can be security blankets for homeowners who are worrywarts. The policies offer comfort, because if there’s a serious complication, you know help is a phone call away.

A warranty is also a convenience for less serious troubles. You don’t have to spend time finding a reliable plumber or a HVAC technician. The warranty company has service providers already lined up.

Homeowners sometimes put away a little extra in savings in case the air conditioner dies, there’s a plumbing leak or “insert your most feared home disaster here.” However, not everyone is able to develop that little nest egg.