Understanding Home Warranty: What It Does, How It Works, and Whether It’s Worth It
When you purchase a home, you may come across the term 'home warranty' or 'home protection plan.' This insurance product aims to provide coverage for built-in home appliances and mechanical systems. Let's break down what a home warranty is, how it works, and whether it is worth purchasing for your living space.
What Is a Home Warranty?
A home warranty is an insurance policy that covers the cost of repairs for certain components of a home. These components include appliances like electric or gas stoves/ovens, built-in microwaves, ceiling fans, heaters/air conditioners, water heaters, and pool pumps. It functions as a cover against unexpected repairs of these built-in and installed appliances.
The policy generally covers a wide range of items, but the specifics can vary based on the company and the policy terms. It provides a level of security by ensuring that you won't be left with huge repair bills when unexpected issues arise.
How Does a Home Warranty Work?
When a covered appliance or system malfunctions, a homeowner can contact the home warranty company. However, the process is not as straightforward as it might initially appear. While the company will send a service provider to fix the issue, they may also charge a deductible per incident. For example, you might have to pay $50 or $100 before the repairs take place. Additionally, the terms and exclusions can be found in the fine print, and the company might point out exceptions to coverage.
In many cases, the service provider sent by the home warranty company may not be as qualified as you would hope. Some reviews, like the one involving American Home Shield (AHS), report poor service and unqualified repair personnel. It's essential to be aware of such potential issues before making a purchase.
Is a Home Warranty Worth It?
The decision to purchase a home warranty largely depends on various factors. If your house is new, it is often covered for a year by the builder. However, the value of a home warranty increases when you consider the age of the house and the appliances. For older homes, a home warranty can provide peace of mind and financial protection against costly repairs.
As a real estate agent, I always recommend that buyers opt for a home warranty, especially when it is paid for by the seller. The investment in a home warranty can prevent significant financial strain caused by unexpected repair costs.
It's important to choose a reputable home warranty company. Avoid those like AHS, which has a reputation for sending unqualified repair personnel. Ensure the service providers are knowledgeable and capable of delivering satisfactory repair services.
For some buyers, the cost of a home warranty can be a barrier. If you are just barely making ends meet, purchasing a home warranty might not be the best use of your limited resources. However, if the house you are considering buying is straining your budget, it may make more sense to use your funds elsewhere, such as saving for repairs or improvements.
Conclusion
Understanding the ins and outs of a home warranty is crucial before making a decision. It can provide valuable coverage and peace of mind, but it is important to research thoroughly and choose a reputable company to ensure the best possible service. Consider your budget and the state of the home you are purchasing to determine if a home warranty is worth its cost.
In summary, a home warranty is a valuable tool, especially for older homes, but it requires careful consideration. Research the company, check reviews, and consider your budget to make the most informed decision for your home needs.