If you own a home in Southern California you must ensure the care, maintenance, and upkeep of the home is a priority if you wish to maintain your property’s value. One way homeowners can keep their appliances and major systems in optimal condition is by investing in a home warranty policy. However, while popular, home warranties are not a good fit for every homeowner. If you are currently considering whether to purchase a home warranty, we recommend first reading this article.
Below, we briefly discuss the pros and cons of home warranty plans to help you determine if one is right for you.
What Exactly are Home Warranties?
First, it is important to point out that home warranties are not the same as home insurance. In other words, a home warranty doesn’t replace the need to have home owners insurance or landlord insurance as they serve two different functions. In general, insurance protects you financially if your home experiences unforeseen damage, such as damage caused by a flood or a fire.
On the other hand, a home warranty policy is a plan that protects your home’s major appliances and major systems, which tend to break down over time. For example, a home warranty will save you money if your dishwasher breaks down or if your water heater suddenly stops working. If you have a home warranty, the plan will either repair or replace the broken appliance or system.
Typically, a home warranty policy will cover things like your dishwasher, air conditioners, furnaces, and plumbing systems. Some home warranty policies may also cover the cost of repairing or replacing refrigerators, stoves, washing machines and dryers. It is important to review the home warranty policy to understand what may and may not be covered and what portions it may cover.
Buying A Home That Includes A Home Warranty
If you’re purchasing a home soon, you may want to consider a home warranty. It’s common for motivated sellers to include a one- or two-year policy to entice buyers and help get to the closing table. If your seller doesn’t offer a policy, you can always negotiate this as part of the deal.
How Does A Home Warranty Policy Work?
While, as explained above, home warranties are not insurance policies, filing a home warranty claim is quite similar to submitting an insurance claim. Every year that the policy is active, you must pay the annual premium. Typically, the annual premium can range anywhere from three hundred dollars to a thousand dollars. The annual premium will depend on the size of your home. Usually, properties under 5,000 square feet are covered under a standard policy. However, if your home is bigger than that, you will probably have to pay for a premium policy.
Just like with any insurance policy, there is a deductible required to be paid each time an appliance breaks down in your home. Depending on your specific policy, your deductible can be as low as $50 and as high as $150.
Once the deductible is paid, the home warranty company will send a service contractor to repair the broken appliance. If the appliance needs to be replaced altogether, the home warranty company will do that as well.
The Pros
Peace of Mind
The primary reason that homeowners purchase home warranty policies is for peace of mind. If an appliance or system breaks in your home, you can enjoy the peace of mind, knowing that it will be fixed. As such, home warranty policies are great for new homeowners, especially first-time homeowners. Most homeowners don’t want to be responsible for major repairs, especially shelling out money for down payments, closing costs, etc. When an appliance or major system breaks down in your home, you don’t have to spend hours looking for someone to make the repair within your budget. Instead, you call the home warranty policy, and they will send a contractor to make the repair.
Overall, maintaining an active policy allows the homeowner to put some of the financial risks of homeownership off on the home warranty company.
Money
For homeowners who are budget conscious, home warranty policies are helpful because it allows homeowners to avoid paying for unexpected expenses. Additionally, paying for a home warranty deductible is far easier than paying for the costs to repair or replace appliances or major systems in your home.
The Cons
Not Every Repair is Covered in a Home Warranty Policy
Some homeowners get a false sense of security regarding home warranties. They mistakenly believe that they will never have to shell out money for another repair once they purchase a home warranty. However, this is far from the truth. Not every repair is covered in a home warranty policy. Additionally, homeowners must be advised that the home warranty will NOT cover appliances and major systems that the homeowner has not properly maintained. In fact, this is often a source of contention between homeowners and home warranty companies. Notably, the term “properly maintained” is subjective and could be up for interpretation, which often does not go in the homeowner’s favor.
Overall, it’s important to read the fine print in a home warranty contract so that you know what you’re getting yourself into. Additionally, if your home is older, you should inquire about the home warranty limits as it applies to older homes.
Upfront Costs
Some homeowners have a problem with the fact that home warranties are paid upfront. While you may anticipate needing to repair your home, the truth is you may end up paying for a policy and won’t require any major work to your appliances or major systems that year.
Disappointed With The Service
While most homeowners are happy with their warranty company, noting that they are responsive, helpful, and professional, other homeowners are dissatisfied with the company’s responsiveness and the repairs’ quality. As such, it is important to find a home warranty company that is highly rated and responsive to their customers so that you won’t be disappointed. There are also issues with getting repairs done quickly or on an emergency basis. This is due to home warranty companies and their vendors not always being available on an emergency basis and having approval policies that add time to most repairs. As such, it is important to find a home warranty company that is highly rated and responsive to their customers so that you won’t be disappointed.
Less Control, Warranties May Cover Repairs Instead of Replacements
You must remember that when you purchase a home warranty policy. You will not have full control over the repair and replacement of your appliances. This means that you do not get to decide when an appliance should be replaced vs. repaired. You also do not get to decide the brand used when technicians are replacing items in your home. Typically, the replacement part will be the equivalent of what is already installed. However, some policies may allow you to pay extra for an upgrade.
For new construction properties, the developer’s or builder’s warranty is probably still in effect. If it is, a home warranty policy typically won’t cover any repairs while the builder’s warranty is still in effect.
Service Call Fees
You must remember that home warranty policies have deductibles, just like a regular insurance policy. This means that every time you have to make a service call. You may have to pay up to $150 to have a contractor visit your home. If you require more than one contractor’s service, you may be required to pay a fee for each of them. However, this is dependent upon the type of policy that you have.
Bottom Line, Should You Purchase a Home Warranty?
Overall, a home warranty policy is a good idea for homeowners who like to have a financial safety net regarding repair costs for the home. Arguably, home warranty policies are best for a new homeowner who does not want to have to do unexpected expenses right after shelling out a huge amount of their savings to purchase a home. In the end, there is no right or wrong decision as it pertains to purchasing a home warranty. However, purchasing a home warranty policy may be a gamble because you may not have as many expenses as you anticipate. If you have a newer home and have savings set aside for repairs and maintenance, you may decide to skip purchasing a home warranty policy. In the end, you have to decide what is right for you and whether or not you enjoy having an extra financial safety net.
Before you go ahead and purchase a home warranty, make sure you do your due diligence and weigh the cons and pros. Lastly, research the company that you are choosing to work with. In the end, the home warranty policy is only as good as the company destined behind.
Need Help? Contact us!
If you are busy or you own several properties and it has become difficult for you to manage, hire an experienced Los Angeles and Orange County property manager like AllView Real Estate. Give us a call and let us show you how to get the most out of your property. You can reach us at (949) 400-4275 or send us an email at info@allviewrealestate.com.
