A home warranty sounds like a great idea. For a cost of between $300-$700, you get an insurance-like service that will fix stuff in your house for free. For many people, home warranties provide a sense of security. BUT home warranties have some big but’s.
In reality, home warranties are a bit mysterious and elusive. Interestingly, and to be completely honest, there doesn’t seem to be a lot of real estate professionals that feel 100% fantastically positive about home warranties. What’s the mystery? And why the trepidation?
What is a home warranty?
First, it’s not a “warranty” The term “warranty” is somewhat misleading. You are more accurately purchasing and entering into a contract most like an insurance policy that covers home repairs at no cost or a discounted rate. Sounds pretty good, especially in the case of purchasing an older home. The coverage generally includes:
- Home systems warranty coverage
- Air conditioning and heating
- Water heaters
- Garbage disposals
- Home appliance warranty coverage
- Range, ovens, cooktops
- Washers and dryers
- Built-in microwaves
The rub really comes with the small print and what policies don’t cover.
The devil’s in the details. It is more important to know more about what policies DO NOT cover than what they DO.
What home warranties generally Do Not cover.
- Wear and tear (there are different classifications of wear and tear like “unusual” and this is at the discretion of the policy provider)
- improper installation
- not complying with code or code violations
- anything covered by homeowner’s insurance
- commercial grade appliances
- items still covered under manufacturer’s warranty
And here’s a big one: Pre-existing conditions.
The other important thing to realize is that policies may not cover all or any appliances.
Home warranty plans may cover your HVAC system but won’t cover a specific part of your HVAC system.
It can get really tricky.
- Look for and ask about these things
- Understand what’s covered
- Ask about or look for exclusions
- Check the coverage limits
- Know how the provider treats pre-existing limits.
A home warranty is one of those products that could invoke every consumer cliche you’ve ever heard… “Buyer Beware”, ”not all are created equal” and “you get what you pay for.”
My advice? There are a lot of home warranty companies out there. Make sure to shop around for the best option that fits your needs. Here are a few I recommend.
Ultimately, a home warranty can be a really good thing if you do your homework before signing on the dotted line. We have heard great stories of cost savings that have been a huge relief for homeowners. Here’s another big BUT; We’ve also heard from homeowners who got the run around when they needed the service the most or were left having to pay for something they weren’t expecting to need. Which side of the equation you are on may just depend on how well you read the fine print.