What is a Home Warranty?
Age is not your friend when it comes to the appliances and heating/cooling systems in your home. Over time, they fail. When it happens, you probably wish you could pass the problem off to a landlord. A home warranty is the next best thing. But what is a home warranty and who should buy one?
What is a home warranty?
Much like insurance or the extended warranty for a smartphone or flat screen TV, a home warranty covers the costs of repairing or replacing almost any malfunctioning system in your home. It typically costs between $300 and $900 a year.
If you had a home warranty, you wouldn’t have to call around to get estimates for repairs when a problem occurs. You wouldn’t have to pay out of pocket to get the problem fixed or have equipment replaced, either.
Instead, you’d call your home warranty provider or submit a ticket online. The warranty company would call the appropriate tradespeople with whom it has made arrangements and send someone to fix the problem, if possible, or replace the malfunctioning appliance with a brand new one. Your home warranty premium will cover the costs, though you’d likely be responsible for a co-pay of about $50 per incident.
Who should buy a home warranty?
Home warranties are particularly great for first-time home buyers who’ve been renters until now. They’re used to calling the landlord whenever there’s a problem. A home warranty company takes over that role.
Sometimes, it takes just one costly and unexpected system repair—and the drama associated with it—to realize the savings of a one-year home warranty.
If you had your home inspected, you’ll know the condition and life expectancy of many of your systems. If some systems are on the outs, you’ll welcome the home warranty. Many appliances and systems start to break down after 15 or 20 years. And you don’t want to deal with multiple systems falling apart at the same time.
Real estate agents often purchase a home warranty for their clients as a closing gift. If not, you can buy one on your own. Shop around to compare premiums and coverage. The older the home, the more coverage you’ll want.
Home warranties are also great for investors or “accidental landlords” who don’t necessarily want to be in the business of fielding repair calls from tenants. If you’re not an experienced real estate investor and don’t have a network of repair folks, it might be easier to pay for the home warranty. The last thing you want is a tenant without hot water calling you all day long. If you have a home warranty, you can cut right to the chase, keep tenants happy, and minimize stress.
Home warranties can save home buyers a lot of time and money—particularly in the first year of ownership, when they are short on both.