It’s no secret that buying a house is a significant financial investment. In fact, it’s one of, if not the biggest purchase most people make in their lives. Therefore, your home is something you’ll want to protect. Buying a home warranty is the best way to ensure your property’s safeguarding. By purchasing a home warranty, you can have peace of mind knowing you’re covered if anything happens to your appliances or home systems.
What Exactly is a Home Warranty?
A home warranty is a service contract that pays for the repair or replacement of the appliances and home systems that are covered in the contract. These items typically include kitchen appliances, electrical, plumbing, and HVAC systems. These warranties do not cover any structural features of a home. Home warranties can provide homeowners with peace of mind by protecting their budget from unexpected expenses that can arise from breakdowns or malfunctions of appliances or systems in their homes. With a home warranty, you pay a monthly or annual premium, and in exchange, the warranty company will repair or replace covered items that break down due to normal wear and tear.
Is a Home Warranty Worth It?
The cost of a home warranty can range anywhere between $300 and $600 a year, and sometimes more depending on the type of coverage you require. A homeowner should also be prepared to pay a fee for service calls throughout the year. This is all dependent on the contract. Be sure to discuss all of these pertinent details at the time of your purchase.
Without a home warranty, you could end up spending thousands of dollars repairing and replacing the systems in your home. Ultimately, deciding whether or not a home warranty is worth the cost depends on your individual situation and needs. Consider the age and condition of your appliances and home systems, as well as your budget and risk tolerance. If you have older appliances or systems that are more likely to break down, a home warranty may provide valuable protection. However, if your appliances and systems are newer or covered by a manufacturer’s warranty, a home warranty may not be necessary.
Average Approximate Replacement Costs for Home Systems and Appliances
When you list them all out, the typical home is filled with so many appliances and systems! Below are some potential home appliance replacements and their national average cost:
- Central Air Conditioning: $3,800 to $7,500
- Furnace: $2,700 to $6,400
- Heat Pump $4,200 to $7,300
- Boiler: $3,700 to $8,200
Costs via HomeAdvisor.com
There are many more, but seeing these numbers alone is reason enough to consider purchasing a home warranty!
Who Should Consider a Home Warranty?
Individuals purchasing a home that has been previously owned should consider a home warranty, especially if the home inspection revealed that the home systems and appliances are nearing the end of their lifespan.
When purchasing a home warranty, it’s important to understand the terms of the contract, how long the coverage lasts, and what it will and will not cover. Additionally, it’s important to note that home warranties are not the same as homeowners insurance, which covers damage caused by events such as fire, theft, or natural disasters. Before purchasing a home warranty, make sure you understand what is covered and what is not, as well as any limitations, deductibles, and service fees associated with the warranty.
In addition to protecting your investment, a home warranty can also be beneficial when selling your home. Having a home warranty in place can potentially increase the desirability of your property in a competitive real estate market. It serves as an attractive selling point, distinguishing your home from others on the market and instilling confidence in prospective buyers. Your potential buyers will have peace of mind knowing that they will be protected from unexpected repair costs for a certain period of time after purchasing the property.
Pros and Cons of a Home Warranty
Pros
- Peace of mind when purchasing a home with used appliances and older systems
- The convenience of making a phone call to have an appliance or home system repaired or replaced
- Alleviates the worry of hiring a trusted technician
- You know exactly what you’re paying all year, rather than having to adjust your budget for unexpected repair or replacement costs.
Cons
- Some companies have dollar limits per repair or per year
- If the system or appliance hasn’t been properly maintained, the home warranty company may deny the repair/replacement request
- Appliance and system repairs and replacements are not always covered depending on the circumstance
- You may not have a say in what make or model of the replacement is
Alternatives to Home Warranties
If, after some careful consideration, you decide that purchasing a home warranty isn’t what’s best for you, there are some alternative solutions you can explore:
- Open a savings account or keep an emergency fund specifically for home system repairs. As we mentioned, these repairs can be costly, but if you continually contribute money towards this fund, the cost may not be as daunting.
- There are also opportunities to take out a loan or refinance for these kinds of repairs. Be sure to consult with a professional lender or bank to learn all of your options, and maintain a good credit score!
Before Purchasing a Home Warranty, Do Your Research!
When purchasing a home warranty, be sure to do your research on the company you are purchasing the warranty from. When shopping around, look at the various premiums, exclusions, and caps on benefits. You can also talk with your friends and family to discover who they use. Additionally, your trusted REALTOR® will likely have recommendations on the best home warranty providers. It doesn’t matter how long ago your closing was; you can always contact your agent for homeownership guidance!