Do I Need a Home Warranty?
You’ve chosen the home you wish to purchase, and you’ve secured financing. All the inspections are completed. Pretty soon, you’ll be closing the deal. Even though you’ve taken care to make sure everything is in good working order, what happens if the furnace breaks a month after you take possession of your new home? You may ask yourself, “Do I need a home warranty?”
Many home buyers have spent a large sum, sometimes the majority of their savings, on the down payment for their home. The concern over repair issues within the first year of home ownership is not a frivolous concern. The first thing one needs to understand is the difference between a home warranty and homeowner’s insurance.
Homeowner’s Insurance vs. Home Warranty
A homeowner’s insurance policy is purchased by the home buyer. This policy is sometimes included in the cost of the mortgage. A homeowner’s insurance policy covers property damage caused by crimes, fires, weather, and water damage. They cover personal items in the event of theft. Some policies cover things such as guests’ accidents that occur on property.
A home warranty covers specific items in the home. Typical items covered include washers, dryers, refrigerators, furnaces, air conditioning systems, hot water heaters, plumbing, and electrical systems. Some policies cover service maintenance to specific items. When an item or system needs isn’t working properly, the home warranty company sends out a service provider to investigate and repair or replace, if needed.
With both of these policies, the purchaser can often choose to add additional coverage. Flood damage, for example, may need to be added to an original homeowner’s policy. For a home warranty, you may need to add additional coverage for other buildings on the property with the exception of the garage.
How Much Does It Cost
A home warranty company charges a premium for coverage. This premium may be monthly or yearly. The cost of the policy depends on certain factors. One consideration is the type of home. This generally refers to single-family residence, condominium, or townhouse.
In general, the size of the home does not have an impact unless it’s over a certain square footage. The age of the home may have an impact on the cost of the policy if it’s a new home.
The actual cost of service calls will vary depending on the company and the policy details. In general, a fee is charged when a service provider is dispatched to your home. You may be responsible for costs not covered by the deductible when it comes to repairs and replacements.
How Does It Work
When you have a home warranty and the air conditioning unit malfunctions, your first step is to call the home warranty company. They will dispatch a service provider to your home to check out the air conditioning unit. The service provider will investigate to see if the unit can be repaired or if it needs to be replaced. They may need to report back to the warranty company to get approval for either option.
The service calls are handled by a selection of providers that the home warranty company has contracts with for repairs and replacements of items and systems covered by the policy. Remember, you are responsible for a service call fee in most cases.
Pros and Cons
If you have a new home with all new appliances, you may not feel a strong need to have a home warranty. New systems and appliances normally have their own warranties and guarantees. If one of the items break or one of the systems malfunction, the original warranty will be used.
Having a home warranty removes your freedom to choose a service provider. For this reason, you may want to do a bit of research to find out which providers the potential home warranty company has contracts with for work orders. You may also lose your freedom to choose things like replacement types and other details.
On the plus side, a home warranty can offer you peace of mind during the first year of your home ownership. If you are a home seller, you may want to offer one as part of the sale conditions. After the first year of service, you can always cancel the warranty or choose to renew the policy.
Consult the Pros
You may have experience with purchasing a home or selling a home, but chances are that you don’t have the extensive knowledge that a real estate professional can offer about home warranties and other important considerations.
The Rock Star Group looks forward to helping you enjoy the process of buying or selling your home. Call us today at 281-960-1900.