For many new owners, this is a great way to gain peace of mind about problems that they used to call the landlord to fix; ones that often aren’t covered under their homeowner’s insurance. But make sure you read your contract carefully to see what is covered, and the company offering the warranty will fix the water heater when it breaks on a wintry Saturday midnight.
Two Types of Coverage: New Homes and Pre-Owned
Pre-Owned Home Warranties: This covers normal wear and tear but not major pre-existing conditions that are usually found in homes 5 years and older. It costs usually between $250 and $600/year with deductibles of $25-$100 and service fees ranging from $10-100 per call.
It may be purchased by the seller to make the property more attractive and minimize disputes after the sale, or as part of negotiation with buyer.
It may also be purchased by a real estate agent as a common thank you gift to the buyers to celebrate a successful transaction. The home buyer could also purchase this warranty in case both the seller and the real estate agent don’t pay. It is normally recommended to get the home warranty for at least the first year of home ownership.
Most policies are renewable at the end of the year.
New Home Warranties: These are purchased by the developer and they can last for as long as 10 years. It usually covers the roof, structure, and foundation. Add-on coverage can include construction workmanship, materials and the home’s mechanical systems.
Download free ebook- How to buy your first home
How does home warranty work?
If an appliance or a system of your home that is covered under the warranty breaks, you can call the company that manages the warranty. They will send a pre-screened serviceman (plumber, electrician, air conditioner repairman, etc.) to fix the problem or replace the appliance. You will be charged a standard service call fee, regardless of the cost of the repair.
When your original warranty expires (or one year after buying a home), you can extend your policy another year with the same company or sign up for a new one.
If you are looking for a home, start your search by getting pre-approved.
How to choose a Home Warranty company?
Make sure you are working with a reputable company. Check the Better Business Bureau for complaints and be sure to inquire how long the company has been in business, how it handles claims and the company’s financial condition.
Download free ebook- How to Buy your First Home
You may also like to read – Home Owners Insurance : Why you Should and Need to Get one