If you have owned your home for longer than six months you will know what I mean when I say a home can be like a black hole you throw money into. It seems like something is always breaking and costing you hundreds of dollars to fix.
A home warranty could ease that constant cash dispense. Home warranties are designed to help homeowners pay for those unexpected mechanical breakdowns that regular home insurance doesn’t cover like clogged pipes, furnace failures, and appliances that go on the blink.
Costs and Fees
These home warranties are fairly inexpensive, typically ranging from $250 to $600 for a year of coverage. Home warranty companies sometimes run special sales and either discount policy prices or offer additional coverage for the same price.
The warranty company contracts with local repair companies to provide service. If something breaks, the homeowner calls the warranty company, which arranges with the local company to dispatch a repair technician. If the repair or replacement is covered by the contract, the homeowner just pays for the service visit - typically $25 to $75.
Understanding Your Coverage
Like any type of insurance you have to carefully read the agreement to understand what is and isn’t covered. Coverage for plumbing, for example, typically ends at your home's foundation, so leaks or breakages beyond that would be your responsibility. "Pre-existing" problems typically aren't covered, nor are breakdowns that result from poor maintenance or improper installation. The contract also may require that a system be upgraded to current building code standards - at the homeowner's expense - before it agrees to repairs.
General Coverage:
- Air conditioning
- Dishwashers
- Doorbells
- Furnace / heating
- Water heater
- Ductwork
- Garbage disposal
- Inside plumbing stoppages
- Ceiling fans
- Electrical systems
- Range and oven
- Telephone wiring
What is Not Covered?
- Outdoor items such as sprinklers
- Faucet repairs are not covered under all plans
- Not all plans pay for refrigerators, washers & dryers or garage door openers
- Spa or pools, unless specific coverage requested
- Permit fees
- Haul aways
What Can Cause Denial of Payment?
- Improper maintenance
- Code violations
- Unusual wear and tear
- Improper installation
If you're considering a warranty:
Find out which government agency, if any, regulates home warranty companies in your state and check its complaint records.
If regulation is loose or nonexistent, pick a company that has a long track history in your state and solid financials. (If the company is public, you can ask for an annual report to see if its home warranty operations are making a profit.)
If someone else - the home seller or a real estate agent - is paying for the policy, insist that the warranty premium be paid in full for the term of the agreement before the sale closes. Check to be sure the amount is listed on the final escrow statement.
While most warranties are issued as part of a home sale, a growing number of homeowners - 55% to 65% - decide to keep the policies after the initial coverage period expires. Having a home warranty policy could save you the headache of paying for those unexpected but inevitable home repairs and the hassle of finding a repair technician to do the work. Be smart and do your research to determine what coverage is best for you in your area.
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