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Everything You Need to Know About Home Warranties

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Home warranties can save new homeowners money by reducing the cost of repairs and providing financial stability when systems and appliances break down. However, it’s important to understand the details before making a decision.

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The benefits of a home warranty include: financial protection, convenience and a network of professional service providers. But there are also some drawbacks.

What is a Home Warranty?

A home warranty is a service contract that covers the cost of repairing certain appliances and systems in your house. Generally, the plan costs an annual fee, and you pay a service call fee to the company when something needs fixing or replacing.

A warranty can be a great investment for those who want to save money and avoid the stress of unexpected repairs or replacements. However, you should consider a few key points before purchasing a home warranty:

For instance, the plans offered by different companies differ in terms of coverage and cost, so you should always compare prices and reviews to ensure you’re getting the best deal. Also, make sure you read the fine print to ensure you understand the terms and conditions of the warranty. Additionally, it’s important to note that home warranties typically do not cover surface or cosmetic issues like dings or scratches on appliances and systems. These types of damages must be reported to the company in order to receive a repair or replacement service.

What are the Benefits of a Home Warranty?

Home warranties offer financial protection, predictable budgeting and comprehensive coverage. For a monthly or yearly fee, you can avoid high repair costs that can wreck your budget and require dipping into your emergency fund.

Unlike standard homeowner’s insurance, home warranty plans typically cover appliances and systems that break down due to normal wear and tear. However, be sure to read the plan contract carefully, as there are usually limits on the number of repairs and service fees.

A home warranty can also be a selling point for your property, as potential buyers will likely see it as an added bonus. Just make sure to choose a company with a transparent contract that clearly defines terms, conditions, clauses and exclusions. Another option is to set aside a separate rainy day savings account that earns interest so that you can use it when necessary without the extra stress of a broken appliance or system. The money you save could even outweigh the cost of a home warranty.

How Does a Home Warranty Work?

Home warranty companies offer a combination of service contracts and insurance

policies. Service contracts pay for repairs or replacement costs of large systems and appliances, such as your furnace, water heater, dishwasher, garbage disposal and washing machine. Insurance policies protect you against financial loss for unforeseen events that can happen in your home, such as property damage to the foundation or walls.

Most warranties have a deductible and cost a fixed amount each year. Some also include a price cap for certain types of items. You can find home warranty plans online, at real estate offices and other locations that provide information on the coverage they offer.

Home buyers often negotiate with the seller to include a home warranty as part of the sales contract. Home warranty providers are regulated in some states, but many are not. As a result, some unscrupulous home warranty companies give the legitimate ones a bad name. Be sure to research the company and read reviews before buying a home warranty plan.

What are the Drawbacks of a Home Warranty?

Home warranties have limits on how much they can pay for a specific repair or replacement. It’s important to carefully read the contract and understand these limitations.

Home warranty companies rely on a limited number of in-network contractors to perform repairs and services. This could mean there’s a wait time for service calls.

The warranty is also not a substitute for regular maintenance on appliances and systems, which could help reduce the likelihood of needing a repair. Home warranties do not typically cover septic systems or outdoor sprinklers, and they can only be purchased for new homes (not existing ones).

Is home warranty worth it? Having a home warranty can ease worries about unforeseen repair bills and provide peace of mind. It can be a smart financial move for homeowners who have a tight budget or want to reserve their emergency fund for other things. It can also be helpful for those who aren’t handy or have trouble finding reliable contractors to fix issues.