We get this question a lot! What is a home warranty? Isn’t that property insurance? Nope. It sure isn’t. So today, I thought I’d tell you a bit about home warranties so you can decide if it’s something you’d like to invest in when you purchase your next home… or first home.
Everyone has to have property insurance. It’s a requirement to get a mortgage. Property insurance protects you from hazard incidents like fire, water, wind or other events specifically listed in your policy. A home warranty covers appliances and major systems that fail due to normal wear and tear. Sounds pretty great, huh?
While it does sound quite appealing, home warranties are like insurance. There is fine print. When purchasing a home warranty be sure to read your contract thoroughly. Some plans will ask you to provide the inspection report from when you purchased your home. They want to verify that the item that is broken was in fact in good working order when you purchased the plan. This is not helpful when you purchase an older home with older appliances. Other plans will cover the “water heater” per say, but that may not include specific items within the water heater.
Another thing to look for when selecting a company is not only the amount of coverage, but the service fee. Every time you call your home warranty company to request service there is a fee associated. We’ve seen everything from $50 to $100. In the grand scheme of things, if your water heater busts and they will replace it for you… $100 isn’t a bad deal for a water heater.
Most plans cover you for 1 year from when you close on your home or when the contract has been initiated. There are others that can cover for 14 months or even 2 years…. and almost all companies offer renewal fee’s.
So, in the long run, a home warranty is not a bad idea, especially if you purchase an older home with older components. Just do your research. Compare companies prices, service fee’s, items covered – or not covered -, and their customer service reviews. In the long run, it could save you thousands of dollars.