There are so many things to look over and make decisions on when buying a home. Is the foundation structurally sound? Is the electrical wiring up to date and safe? Who will your Homeowner Insurance be provided by? Do you need to purchase a Home Warranty as well?? What actually is a Home Warranty anyways?
A Home Warranty should not be confused with Homeowners Insurance, the two are different and offer different types of protection to home buyers and their newly purchased homes.
Homeowners Insurance covers fires/fire damage, hail damage, property crime, some water damage, and other things that affect your homes structure and personal property. A Home warranty on the other hand is a service contract between the homeowner and Warranty company that provides discounted services on repairs or replacement of appliances. Think air conditioning, furnaces, plumbing, electrical systems, washers, dryers, refrigerators. Additional coverage can also be purchased to ensure further more in depth protection on repairs and replacements. Homeowners Insurance is generally required by all loan/mortgage companies to ensure protection. Home Warranties are the choice of the buyer and thus are not required.
So now the question is, do you really need to purchase a Home Warranty and is it really money well spent? Warranties seem like they would be a great safety net for homeowners to help protect them against costly repairs and replacements of appliances. In general it seems that these expensive repairs always seem to happen when you least expect it and when money is
tight! We broke down the pro and cons of investing in a Home Warranty to help you decide if the pros outweigh the cons for each individual.
Pro’s Of A Home Warranty
- Great if you don’t have an emergency fund set up for unforeseen repairs
- If you are unable to DIY on repairs
- Don’t have the time/knowledge to find a good contractor
- If you invested in expensive appliances
- Provides a safety net if you do not have a ton of information on how well home was built or maintained
- You used your savings to purchase the home and cash is tight
- Great for sellers to offer to prospective buyers as a type of incentive for purchasing the home
Cons Of A Home Warranty
- Will not cover issues caused by not properly maintaining items
- Proper maintenance can be a grey area between warranty companies and homeowners
- There are numerous exclusions that come with a Home Warranty
- Limited dollar amount per repair as well as in a yearly period
- Eliminates personal choice of contractor
- Can be more of a headache with the Warranty company as the middleman
Our advice is that you weigh all your pro’s and con’s depending on your individual situation. Some homeowners may feel it is in their best interest to purchase a Home Warranty while others may not. If you do choose to go with a Home Warranty we suggest as always exploring your options when it comes to choosing the best company to work with. Also explore different costs as some companies may have higher rates than others. If the seller of your newly purchased home offers a one year Home warranty it’s of no expensive to you in the first year and you can choose if it is something valuable enough for you to keep once the contract has ended.