Do I Need a Home Warranty?

When buying a home, one of the items you can ask the Seller to provide, or purchase yourself is a Home Warranty.  A Home Warranty is an insurance plan that covers home repairs. The home warranty costs about $350 depending on the options you choose and will provide you easy access to pre-approved repair technicians with a small deductible of about $75 per problem.  A Home Warranty provides protection against high repair expenses during the first year of home ownership.

If you are buying an older home, it definitely makes sense to have a home warranty. It protects you from sky high repair costs, such as an air conditioner replacement that can cost several thousand dollars.

If you are buying a new home, the home many come with a builder’s warranty for 5 to 10 years.  In this case, you may not need a home warranty.   Keep in mind, new houses can and will have problems too, so if the builder does not provide a warranty, it’s a prudent idea to purchase one. If you are buying a new home, check with the builder to see if all the appliances are covered under the warranty, because, even new appliances can break.

When it comes to urgent repairs, it is not convenient to screen multiple contractors, getting quotes and inspecting the work etc.  You need someone immediately who can get the job done.  The insurance company will take care of that for you.  It’s a little like having a concierge service for home repairs.

In any case, if your home is old or new, it is a good idea to have a home warranty, to provide extra insurance for your home in case of a break down. Here are the four points which should help you in deciding whether to buy a home warranty:

• The home has old appliances and are likely to receive repairs in the coming year
• The AC is more than 10 years old
• You are financially not prepared to incur major expenses in case of failure (some appliances may cost a couple of thousand dollars to repair)
• You do not wish to search around for a repair person or do not have the time to get the repairs done

• You are making an investment and buying peace of mind. In case of a break down, you do not need to spend your time searching for a repair person and pay a huge repair bill.
• All you have to do is call the home warranty company, pay your deductible, irrespective of how long or how much it costs to get the repair done.
• One break down of an air conditioner without a home warranty can cost more than the warranty and deductible – do you trust your AC?

Draw Backs

• You will have to pay a deductible every time you call the home warranty company for repairs.  Only one deductible per incident.
• Home Warranty premium will cost you anywhere, between $300 to $600. If you do not anticipate repairs worth more than this, it is not advisable to opt for a Home Warranty.

• Some insurance companies will use small print clauses to not pay when the repair costs go over a certain limit. Be very careful when choosing a company. Many home owners fail to understand that pre-existing conditions and issues arising due to lack of maintenance are not covered under the home warranty.
• Home Warranty companies put their preference to repairing and not replacing the faulty equipment.

Every home warranty company has different plans, so understand the plan and what is included and excluded. It is advisable to read the contract in detail to understand its limitations, restrictions and conditions.

When you are buying a home, always ask for a home warranty from the Seller.  If the Seller will not or cannot provide one for you, it is worth the investment for the peace of mind to get the home warranty yourself. Protect yourself and your home from unexpected repairs and costs.