Imagine that you’ve recently moved into your new home. Before you closed on the purchase of the property, you did your due diligence and the home inspection came back clean – maybe the report said the appliances were a little older, but were all in good working order.
But then a month or two later after you’ve settled in, you turn on the air conditioning and it doesn’t work. Or the dishwasher suddenly quits. Or the water heater starts leaking. These things happen unfortunately. Having a home warranty policy can alleviate some of the financial burden of costly repairs. But what is a home warranty, and is a home warranty worth it?
What’s the difference between homeowner’s insurance and a home warranty policy?
Your homeowner’s insurance covers your home’s structure in case of a disaster or accident, such as a fire or a tree falling & damaging your roof. What it doesn’t cover is when your heating system breaks down in the middle of winter, or when the garage door opener stops working. That’s where a home warranty policy comes in. It’s designed to cover items that are in good-working condition when you move in to your new home, but later fail due to normal wear and tear.
What does a typical home warranty cover?
Home warranties cover repairs and replacements on home systems such as:
- Basic home systems such as plumbing and electrical
- Heating and cooling systems, including water heaters
- Appliances such as the washer & dryer
- Kitchen appliances such as the oven, range, built-in microwave, and dishwasher
How much do home warranties cost?
Basic coverage for a home warranty usually starts at around $300 for a one-year policy and can go up to $700 for more comprehensive plans. The cost can even go higher if you add coverage for things like swimming pools. In addition to the initial cost of the policy, each time something in your home stops working, you’ll have to pay a service fee for sending someone out to do the repair. These typically range between $60 and $100.
Although a homeowner can purchase a home warranty at any time, the best deals are usually found if they’re ordered during escrow and before closing. At the end of the first year you have the option to renew your home warranty policy. Some homeowners choose to renew their home warranty policies every year to continue to have peace of mind in case a major repair comes up. Many sellers will choose to provide a one-year home warranty as part of a sale in order to attract prospective buyers.
Pros and cons of home warranties
While home warranties can be very beneficial, they also have limitations. Here are some of the pros and cons of home warranties to consider.
- A home warranty can provide peace of mind if you’re buying an older home with used appliances and older systems that are long out of their manufacturers’ warranties.
- If a buyer is new to an area, they may not have time to establish relationships with contractors or repairmen. The home warranty company will take care of hiring vetted and licensed professionals to take care of the repairs.
- Not all homeowners have the DIY skills to handle repairs on their own. Having a home warranty to fall back on alleviates that worry.
- Home warranties offer broader coverage than most manufacturers’ warranties.
- Home warranty companies impose dollar limits per repair.
- Claims can be denied if an item has not been properly maintained. What is considered proper maintenance can be a gray area, and can cause a disagreement between the warranty company and the homeowner.
- Home warranty companies choose the professional they send out to take care of the problem and limit you to a choice of approved contractors they have a relationship with.
- If an appliance needs replacement, you may not have a say about the make and model of the replacement.
Is a home warranty worth it? The Bottom Line
Not everyone is of the opinion that home warranties are worth the cost. It really depends on your own financial situation and the type of property you have purchased. It’s typically not necessary with new homes as most of the appliances are already covered under manufacturers’ warranties. But, in general, the older the home, the greater the odds that something is bound to break or stop working, making a home warranty cost-effective. And when major systems break down, a home warranty can save you thousands of dollars in repair or replacement costs.
Contact the Donnelly Group
If you are looking to buy a home in the Phoenix area, we can help. The Donnelly Group has the expertise and experience to help you through the process, and we can advise whether a home warranty is worth it for the property you purchase! Please don’t hesitate to contact our team at 480-792-9700 or by email.