The term Home Warranty is used to describe a variety of products. In some situations, new homebuilders use the term to describe the standard coverage they provide on items in a new home. In other contexts, it is used to describe an insurance policy purchased by a homebuyer or home seller to cover items on a resale home (not new construction).
In this article, we are referring to the later type of policy ?a policy purchased by a homebuyer or home seller for a resale home. In this context, a home warranty is a service contract to maintain or repair, when needed, certain items in a home, condominium or townhouse. This type of warranty is an option for buyers wanting more coverage beyond items normally covered in a homeowner's insurance policy. Home sellers sometimes purchase this type of policy and offer this as an incentive to homebuyers to purchase their home.
If a repair is needed during a covered period for items that are covered, then the homeowner simply contacts the Warranty Company to request service. The Warranty Company will send out a qualified professional to repair the item. The homeowner will usually have to pay a small deductible for a service call, and the warranty company covers the rest.
The home warranty industry is a competitive business and items covered and costs vary from company to company. In general, many home warranty policies cover: plumbing, heating, electrical system, water heater and major appliances, such as range/oven/cooktop, dishwasher, and garbage disposal. Policies are typically issued in one-year intervals, with the option to renew at the end of the year. The cost of a policy varies from $200 per year for a small home, condo or townhouse, up to $1000 or more for large properties with expanded coverage.
So should you get a home warranty? The answer is it depends on the condition and age of the home, your financial situation, and your level of risk tolerance. A warranty may be a good idea if you are buying an older home that is in poor condition. However, if you are buying a newer home in excellent condition, then you may decide that there is less risk.
In making your decision, be sure you carefully evaluate your financial situation and determine if you have the means to pay for a major repair should some costly item in the home need repair or replacement. You should also carefully evaluate your homeowner's insurance policy to determine what items are already covered. A good home inspector can provide you a through evaluation about the condition of a home and it's major systems before you sign a home purchase contract. This information will help you decide on whether or not to purchase a warranty policy.
By the name of it, many people misinterpret home warranty as some warranty that covers everything (including interior, house structure and even paint). In reality home warranty is merely an insurance for your home appliances (still, not that bad? The home appliances include fans, air conditions, heaters, oven, washing machines and other domestic devices. Home warranty mostly comes into the consideration at the time of sale, though it has no real implications, a home warranty from the seller or real estate agent can add to your peace of mind as a home buyer. Just because the name is heard mostly at the time of sale, it doesn't mean you can't have one for the houses you are living in for years.
As in the case of warranties, the home warranty issuing company is responsible for repairing or replacing the appliance that stops functioning properly. Of course, they have some charges that you must pay on yearly basis just like and other insurance, plus you have to pay a small fee every time you avail their services.
Pros & Cons: As stated earlier, a home warranty doesn't cover everything; hence you are not freed from all the worries or uncertainties that turn up at the time of home purchase. Still, a good home warranty can provide you with considerable assurance because it may cover heating systems, plumbing or electrical systems along with all the major appliances. In addition to that, home warranty will be perceived as a bonus for buyer when you put your home for sale. Coming to the negative aspects, home warranty works only in case of normal deterioration (wear and tear), your claim will be rejected if the problem was caused by inadequate use or maintenance. If the company (the one providing the warranty) rejects your claim, there's hardly anything you can do, similarly you can't force them to replace some appliance even if it's breaking down every other day.
Some Advise: First, home warranty is not necessary, it's specifically meant for those who find it extremely irksome to go through repairing or maintenance work on their own. If you have purchased a newly built house, and all the appliances, cooling or plumbing systems are in good shape then home warranty is an unnecessary burden that you should avoid. When you are convinced that you can benefit by having home warranty, you should choose the best service provider after reasonable research. Read the terms and conditions carefully, specially the part that tells what's protected under the warranty and what's not. Moreover, chew on the possible circumstances where your claim can be rejected.
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