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What Are Home Warranties? Do You Need One?
A home warranty is not much different from
a warranty you might have on your car, your computer or your
home entertainment center. A warranty on your home
usually covers all of your home’s major mechanical systems,
including
hot tubs, pools, wells, septic tanks and all of your appliances. Some policies even cover the roof of your home and almost anything
else you’d like to include, as long as it’s specified in the
policy.
Home
warranties are obtainable for most any dwelling, including
mobile homes, condominiums, town houses and manufactured homes.
They can be purchased by either the buyer or the seller; some
sellers will include a home warranty policy to make purchasing
their home more attractive. Including a home warranty with
the sale is an excellent idea, especially if the home is older
and the systems and appliances are aging. Since the policy
can be purchased at closing, the seller doesn’t have to come
up with the premium out of pocket. Further, the cost of the
policy can be split between the buyer and the seller, depending
on the terms of the sale.
Home
warranty policies are generally effective for one year
and are renewable. However, you can expect to pay a little
more for coverage each year, as the items covered continue
to age. This is reasonable. Policy costs vary according to
the list of things covered, but an average cost would be between
$350 and $500 per year. Obviously, when obtaining a policy
it is important to be specific about coverage. You can expect
to pay a small co-payment when the repair person responds to
make a repair. This is an industry standard. Your payment will
range from $35 to $55 per visit.
According to a Gallup poll, 79%
of buyers and sellers surveyed rated home warranties as
one of the most important aspects
of buying a home. These policies are not like hazard insurance,
which covers losses due to fires, storms and accidents; home
warranties cover normal wear and tear breakdowns. A new home
and its major systems are usually warranted by the builder
for at least one year; thereafter, your home warranty policy
coverage will take effect. Be sure to understand the limitations
and intent of your home warranty. As an example, should your
microwave oven catch fire and damage your kitchen cabinets,
your home warranty would cover the cost of the microwave; your
home owners insurance would pay to fix the cabinets.
Before buying your home warranty policy, you should shop
around and find the best and most cost-effective provider. Get recommendations
from your mortgage company, your builder, your friends, and
from the Better Business Bureau. Obviously, some companies
are better and more reliable than others. Ask specific questions:
Do they subcontract their work? What is their normal response
time? If your freezer stops running you need someone to respond
quickly.
When trying to decide whether or not you need a home warranty,
the rule of thumb is: the older your home, the more
you will benefit from a home warranty policy. Most systems and appliances
covered under a home warranty can be expected to last at least
5 years. Therefore, during the early years of your new home,
the home warranty policy may not be necessary. As the components
of your home age, the need for a home warranty policy becomes
more critical. It is obviously more attractive to pay $400
or $500 in policy premiums than shell out several thousand
dollars for a new furnace or even several hundred for a new
refrigerator. The policy will easily pay for itself if a major
home system has to be repaired or even one major appliance
has to be replaced.
If
you’re the owner of rental property, you should definitely
consider a home warranty policy. Unlike the appliances and
systems in your own home, you have little, if any, control
over the frequency and manner in which these things are used
by your tenants. Odds are that you will have to replace or
repair items and systems more frequently in your rental property
than in your own home. As a landlord, your home warranty policy
may very well save you money, but just as importantly, it can
buy you peace of mind.
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SolveYourProblem.com : 2007
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