The Worth Of Purchasing A Home Warranty

When you buy a home in Texas, to purchase a home warranty is a great choice. The option to purchase a home warranty is able to relieve some of the financial pressure that new homeowners experience if a home system or major appliance breaks down. You will be paying upfront for the warranty, but in most cases, the money you will save is usually worth those added expenses. Below is important information about home warranties, how much they cost, and whether they are worth it.

What Is A Home Warranty?

Home warranties are not the same as insurance policies. Instead, they are a type of service contract which will pay for the costs involved in a replacement or repair of items that are covered in the warranty, like a major kitchen appliance, along with plumbing, electrical, air-conditioning, and heating systems. These warranties do not cover doors, windows, or any of the other types of structural features. Homeowners insurance will cover the losses that are incurred when your belongings or your home is lost or damaged due to theft, fire, or other types of perils.

Is A Home Warranty Worth It?

The costs involved for home warranties generally range from $350 to $600 a year. These costs increase if you decide on enhanced coverage that covers other items such as septic systems, pools, dryers, and washers. Over and above your annual premium, you will also need to pay for service call fees which range from $50 to $125, which will depend on the contract type you have purchased.

If you do not have a home warranty, then you could end up spending hundreds or even thousands to replace or repair major systems or appliances in your home. If you do not have savings set aside for these types of expenses, then the option of a home warranty would definitely be in your best interests. Below are some of the national cost averages to replace major appliances and systems in the home:

• Furnace – $4,286
• Central air-conditioner – $5,467
• Water heater – Tank $889 (40 to 50-gallon tanks), or Tankless – $3,000
• Appliance repairs – between $104 to $237

Who Could Benefit From A Home Warranty?

If you are about to purchase an older home, it would be a good idea to purchase a home warranty that comes from a reliable company. This is even more important if the home inspection has revealed that most of the home’s systems and appliances are close to the end of their life-span. Ensure that you fully understand what the warranty covers and the terms-and-conditions. Also, find out the duration of the coverage.

Some home sellers offer a home warranty to the buyer in order to make the deal appear more attractive. If a major system or appliance had to stop working, it could then be replaced or repaired at a fraction of the cost. This is something that a new buyer will really appreciate.

When Is It A Better Idea To Skip Out On A Home Warranty?

The buyers that purchase a brand new home are typically offered with a warranty of some form from their builder for the materials used to build the home, and workmanship which typically includes cooling and heating, electrical, and plumbing systems. These warranties are usually offered for between 1 to 10 years.

The appliances in new constructions are not covered by builders, yet they in most cases come with their own manufacturer’s warranty. This is why it is not a good idea to invest in a home warranty on a home that is newly built because the appliances and systems will still be under warranty.

The Advantages Of A Home Warranty

The home warranty offers a safety net to the buyers that buy homes that feature older systems and used appliances. In addition, if you are moving to a new area, you probably do not have relationships with local mechanics or contractors to assist you with repairs. A home warranty will usually take care of hiring and finding trustworthy technicians.

Not every homeowner is blessed with the DIY skills to deal with repairs. For these homeowners, a home warranty can be very valuable when things start to go wrong. In addition, homeowners that are older usually also appreciate how convenient it is to just pick up the phone when something in the home breaks or is in need of repairs.

The Disadvantages Of A Home Warranty

It is very important that you are aware of what will be covered and what is not. You need to read over your protection plan in order to find out about the exclusions. This will help you to decide whether you need to upgrade the contract.

Here are a few of the potential drawbacks:

• Some of the home warranty businesses will impose a limit per year or per repair. These limits can vary significantly, so it is important to find out before you buy the warranty.

• Your claim can be denied from the company that you purchased the warranty from if the appliance or system has not been maintained properly. This can become a point of conflict since records of the correct maintenance can in some cases be difficult or impossible to provide, which is even truer if you have only just recently purchased the home. It is important to be aware that some of the home warranty companies will use “improper maintenance” as a reason to dispute a justifiable claim.

• The home warranty provider will make the decision on whether to replace or repair a system or appliance, and you may not or may agree with this decision.

• If you need an appliance replaced, in certain cases, you might not be allowed to choose the model or the make for the replacement.

• For certain circumstances, like power surges, the home warranty will not cover the system or appliance.

Take Caution When It Comes To Home Warranty Reviews

Be careful when you read up on the online reviews for home warranty service providers. Some of the rankings are a scam, which these companies pay for.

For example, some of the websites that use generic-domain names will appear in searches, that ostensibly list the “best” home warranty businesses. One company will appear as the “best overall”, on one side, and then be the “top-listed” home warranty business on another website using a domain name that is slightly different.

Also, do not trust the testimonials from customers who appear on the website of the home warranty company. It is common to find mainly rave reviews and 5-star ratings. One of the businesses has top-rated reviews on their own website, yet on the BBB’s website, this company received a 1-star rating on an average based on 593 customer reviews. This company received a B rating from the BBB.

The BBBs ratings include:

• The complaint numbers
• The overall size of a company
• How the company responds to complaints, and how quickly they resolve complaints, and whether these companies make an effort in order to deal with and resolve complaints

One of the better approaches would be to go onto the BBB’s website and look for the companies that have either an A or A+ rating and then contact them directly from there.

Conclusion

If you have decided to purchase a home warranty, always check on the rating of the business with the Better Business Bureau. Do not be fooled that a B-rating means that the company is “above average”.

Also ensure that you understand the contract when it comes to standard coverage, upgraded items, and optional coverage. You also need to know about any limitations. It some cases it is not necessary to fork out the extra cash for upgraded or optional coverage.

Author’s Bio:

Kathleen is a financial counselor and a writer covering an array of topics including home mortgage loans and tax preparations that can help people in managing their money better and teaching them in investing their funds wisely. In her spare time, she loves reading books and sometimes, you can find her at the gym keeping herself fit and healthy.