The Home Warranty – Is It Really Worth It?
April 27th, 2008 categories: Repairs
While new home buyers have the convenience of a builder’s home warranty, for many home buyers, purchasing existing homes, the last thing running through their mind as they finalize paperwork at the settlement table are possible repairs to the home they’re about to purchase. But, as many of us have learned the hard way, we could have avoided some of that post purchase discomfort, and the large repair bill, by making sure we were covered with an effective Home Warranty plan before the fact. While home warranties aren’t insurance policies, and aren’t regulated in many states, many of the warranties offered are worthwhile and cover a home’s major operational systems.
Warranty policies normally cover the home’s electrical systems, plumbing, heating and A/C, and most appliances. But, the key to any warranty, as with many contracts, is in the fine print. After reading the policy over carefully, make sure you get any questions you may have answered, by the company, before initiating the policy. While there are many similarities between the policies from Home Warranty companies, there are differences as well. Other than the major systems covered, generally, these similarities include:
- You will pay a “service” (deductible) fee when you call for a repair. Normally these run anywhere between $50-$100. (You gotta love those fees!)
- Call the warranty company when something breaks, NOT your local repairman – that’s the warranty company’s job.
- Pre-existing conditions typically aren’t covered.
- Additional systems may be added to the coverage, for a fee. Some of these optional items may include a well pump, swimming pool or spa, septic system, and roof repair. These add-ons normally cost $75 – $175.
Local repair companies are contracted through the warranty companies. When something malfunctions, the homewoner makes the call to the warranty company, who, in turn, calls its’ local contractor to arrange for the service call. In turn, the local contractor will call you to arrange for the service call. The warranty provides you coverage, and coordinates the repair work with a trusted, reputable local company. For many homeowners, this is exactly what they are paying for. The convenience of not having to decide who to call, or simply not wanting to try and play phone tag with a repair company, makes the policy choice an easy one. But, are there any problems with home warranties? Certainly, problems may and do arise.
Possible Drawbacks
Many of these can be avoided, if, as mentioned before, you read the fine print.
First, know what is covered and what isn’t. The policy paperwork details what the policy covers.
Secondly, you may be dissatisfied with the local contractor that does the work. While its been suggested that you don’t get to choose the local contractor doing the repair work, if you aren’t satisfied with the repair, you can request the warranty company send out a different local contractor next time a repair is needed on a particular system.
Thirdly, the contract may require that aging systems be upgraded to current building code before any repairs are done. In addition to the pre-existing condition exclusion, repairs needed due to improper installation or poor maintenance may also be denied under the warranty.
Lastly, the contrarians may argue that warranties are a waste of money. Instead, you’d be better off establishing an emergency fund for necessary repairs. If that’s the case, make it a budget item, and plan for it. Because, for many of us, if it isn’t in the budget, it’s not going to happen!
For many home buyers, a home warranty provides peace of mind, knowing that if something breaks, you’re covered when it comes to repairs. While the devil’s in the details, in most cases, these warranties will take care of the major operational home systems, and appliances. And, for many, an ounce of prevention is, as they say, worth a pound of cure. And, peace of mind, is normally well worth the price of admission.
This is a very good overview of how home warranties work. You are right, you’d better read the fine print and don’t assume EVERYTHING is covered!