Owning a home can be stressful, costly, and fun all at the same time. Of course, when you buy a home the first thing you want to do is protect the life and property within it. But figuring out the best way to do that can be confusing. Aside from typical insurance, there are home warranties to consider. They can save you thousands in out-of-pocket repair costs, as well as increase the value of your home should you be selling it soon. But what do you need to know when buying a home warranty? We put together a list of 10 essential questions to ask.
1) What is the Difference Between a Home Warranty and Home Insurance?
This is different from home insurance in that a warranty covers any appliance repairs, as well as plumbing or electrical problems that may occur. Insurance covers the structure of the house, as well as any personal property such as clothes, electronics, or jewelry. It also covers your liability, should someone get hurt on your property. So while you may have been fully aware of the benefits of insurance, the home warranty covers all appliances whether in need of repair or replacement.
2) How Much Does a Home Warranty Cost?
This can vary based on many factors. First of all, it’s important to know that warranty companies are well aware that the longer an appliance is in use, it will break down eventually. So you will likely be offered a steeply discounted rate on a warranty in your first year, and then see the rate increase every year after that. It’s important to know not just what you’re paying this year, but what you will be paying in the years afterwards. A typical plan can run anywhere from $250 to $500, and lasts from 12 months to 10 years, depending upon the company and type of agreement. Not included in the warranty cost, however, is the cost of actually calling upon a service repairman. This charge is normally fixed, and could have a surcharge for emergency visits. These are good follow-up questions to ask regarding the price of a home warranty. Also note that for large appliances, such as a hot-tub or a pool, these are included alongside the basic plan a la carte, and will increase the overall cost.
3) What Specific Items Are Covered?
This can vary from one company to another, so it’s impossible to answer this question for you with 100% accuracy; take notice of specific things that are covered, and any extra price tag they may try to apply to larger items, such as air conditioning or furnace. Typically though, they will always include washer dryer, plumbing, electrical system, and roof leaks.
4) Is Home Inspection Required Before Enrollment?
The short answer is no, however your appliances must be properly installed, maintained, and in good working condition for coverage to be applied. Much like health insurance, pre-existing conditions are not covered.
5) If Something Does Break/Need Repair, How Do I Make a Claim?
The one thing to remember here is to keep a written record of every correspondence with the home warranty company and/or the service vendor to whom they send the work. Make your request in writing, and ask for a return receipt to keep for your records. This service vendor will contact a repairman, who will either fix the item in question or recommend a replacement. There is a service charge for this, however the bill will come from your warranty company, rather than the repairman himself.
6) How Quickly Can Repairs Be Done?
Again, this depends on the company. Some are available 24 hours a day, while others have set times. All provide a time frame for repairs to be done, but there are important follow-up questions to ask here as well. What defines an emergency repair, and how quickly can they usually respond in such a situation? They should be able to provide information about the contractors it uses so that you can have a general idea about how far away help is should an emergency occur.
7) Should I Have a Dispute Regarding a Claim, How Do I Resolve This?
In the event that you happen to disagree with the cost, or any other dispute with the warranty company or the repair service, you can send this in for mediation, which means a neutral third-party will examine your dispute and decide whether you are in the right. If mediation fails, you can submit your claim for arbitration, but not all repairs or replacements may be covered. Disputes such as these are unique to the company, and should be explained to you.
8) What Are My Responsibilities?
A very important thing to note is that some home warranty companies require proof of maintenance before they insure an appliance in your home. Even if they don’t, they can still refuse to insure an item should they deem it as not properly maintained.
9) When Does Coverage Actually Begin?
If you purchase a warranty at the time you are buying a home, coverage begins the day of closing. Otherwise, coverage begins 15 days after receipt of payment.
10) What if I Sell My Home While Still Under Warranty?
Much like early termination or early pay-off of a car loan, it’s good to know the specificities of this situation. Any remaining coverage will transfer to the buyer at no additional cost. You can even renew early to supply additional coverage for the new homeowner. There is a lot of flexibility for you in this regard. Plus, this is a huge selling point (pun intended) when you are putting your house on the market.
Additional Suggestions
Bottom line, always, always read the fine print. Be aware of any extra costs, loopholes, or nuances of your contract so that you can always be prepared for any circumstance, and expect the unexpected. Buying a home can be tricky, but protecting your appliances doesn’t have to be.
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