February 11, 2017
Believe it or not, National Home Warranty Day is real, and it happens to be today—February 10. In honor of the day (which was originally submitted for recognition by a home warranty company – go figure!), now’s the perfect time to discuss the pros and cons of buying a home warranty policy. The short answer is, it’s not for everybody, but it can be a wise choice for some.
Home Warranty vs. Homeowner’s Insurance
First, let’s go over the basic difference between a home warranty and homeowner’s insurance, because they’re very different creatures.
A home warranty is an optional policy you can buy to help offset the costs to repair or replace home appliances or home systems such as an oven or heating.
Homeowner’s insurance, which is required by most finance companies, covers the home structure and belongings inside in case of certain disasters and damage. It also covers injury to people on the property.
To Buy Or Not To Buy?
It’s a valid question, one that doesn’t have a clear yes-or-no answer. Fortunately, we’ve identified some factors that may guide you in the right direction.
1. Is your house (or rather, the stuff in it) new or old?
The first thing to evaluate when considering a home warranty is the age of the appliances and systems covered by the plan—not necessarily the home itself. So, if your house was built in 1980 but it underwent a complete remodel in 2016, consider the clock reset as far as a home warranty is concerned. The key is to keep in mind that life expectancy matters.
If your home is new construction, the purchase price of your home may have included a home warranty for at least the first year. And why not? Everything’s brand new and generally in good working order.
If your home is in the new-er category, the sort of appliances and materials typically covered by a home warranty may still have a healthy life span. A home warranty may be overkill.
Is your house an oldie but a goodie from the ceiling fan down to the electrical system? Again, you should evaluate the age and condition of the specific items covered by the warranty you want. By researching the costs to repair or replace each item, and then factoring in how much you’ll have to cover with a home warranty in place, you should have a better sense of whether you should go head first into a home warranty policy.
2. Are you handy?
If the thought of changing out a dishwasher’s valve switch or replacing an oven element has you mystified (or terrified), you may not be part of the Handy Person Club—and there’s nothing wrong with that. But you may be a better candidate for a home warranty than your counterpart who takes on a repair with excitement and a rather well stocked toolbox.
That said, if you’re a good surfer of the internet and are game for a good challenge, you may be able to take on certain DIY fixes yourself. This can save you money and make the home warranty less warranted. Only you know the answer.
3. Do you have certain contractors you like to work with?
If you’ve already found a trusty, timely plumber you love, or an HVAC person who will show up on a 100-degree day as if you were their only customer, a home warranty may not be for you. Why, you ask? Because home warranties often don’t allow you to choose your own contractors. If you’re new to homeownership (welcome!), you may not have any favorites just yet, so using the prescribed contractors won’t be an issue.
A Few Parting Words
If you are either selling your home or are in the market for a new one, a home warranty can be a good bargaining tool. It gives homebuyers peace of mind and makes the sellers seem more confident in the condition of their home.
Once you’ve weighed the pros and cons of getting a home warranty, do yourself one more favor: Read the fine print. Find out exactly what’s covered so there are no surprised down the road. You won’t like those kind of surprises, guaranteed.