You’ve moved in. You’ve unpacked (most of) your boxes. You’ve figured out about half of the light switches. You are well on your way to conquering that new house checklist.
Before declaring victory, consider what you need to do to protect your home. You probably purchased homeowners insurance while processing your mortgage paperwork. But beyond that, what else is needed to cover your assets?
This is where a home warranty comes into play. Home warranties can be a good option for new homeowners, but it’s important to fully understand what they are - and what they can and can’t do - before purchasing.
So, without further ado, let’s answer some of those burning questions about home warranties.
What is a home warranty?
A home warranty is like an insurance policy for appliances and home systems, such as refrigerators, plumbing, water heaters and even garage door openers. They cover items that started off in good condition but fail due to normal wear and tear.
Let’s say you move in and a year later your HVAC system goes on the fritz. That could cost you thousands of dollars to repair or replace, but if you have a home warranty, you may only pay a fraction of the cost before it’s fixed (more on costs later). Plus it’ll save you time that would have otherwise been spent searching for a certified repair person.
How does it differ from homeowners insurance?
Homeowners insurance helps to cover structural damage and loss of personal property from calamities such as theft or fire, while a home warranty covers repairs and replacements of appliances and home systems due to regular wear and tear. Also, homeowners insurance is required when purchasing a home via a mortgage, whereas home warranties are optional.
For example, if your stove isn’t working because it’s 15 years old and it’s reached the end of its rope, you’d use your home warranty. But if damage from a fire caused your stove to malfunction, that’s where your home insurance would help.
How do I know if I need to buy a warranty?
Home warranties can certainly be beneficial; just know they aren’t always necessary for every circumstance.
For instance, if you’re buying a newly built home or the previous homeowners just recently replaced or updated appliances, you shouldn’t expect to have any major malfunctions. On the other hand, if the home and/or its appliances are on the older side, it’s worth considering a home warranty, especially if there were any red flags during your home inspection. Sometimes home owners will even throw in a home warranty as a perk to give prospective buyers peace of mind.
What’s the catch?
While there are a lot of benefits to getting a warranty, there are some restrictions that are important to note before making the purchase. Every time you need something fixed, you’ll first have to pay a deductible. Also, not all repairs are created equal - warranties may not cover specialty appliances such as high-efficiency washers and dryers - so you may end up footing the bill after all. Also, if you move in and decide to replace most of the appliances out of personal preference, your new appliances will come with a manufacturer’s warranty, so buying a home warranty may end up being redundant.
How much will one set me back?
Costs for a home warranty can vary based on everything from what plan you buy to which provider you choose, to even where you live. For instance, if you reside in Ohio you may pay around $600 for major repairs, but if you call New York your home, the same repairs could be upward of $1,000.
Also, you don’t just pay one fee and you’re done. As mentioned above, you’ll need to pay a deductible each time you need a repair. You’ll also have to shell out some cash for service call fees. For a general idea of what you may pay out of pocket for a home warranty, Consumer Affairs shares the below summary of average home warranty costs:
What about other types of appliance warranties?
Appliances often come with a manufacturer’s warranty, which will offer to repair, service and sometimes replace that appliance for a certain amount of time. However, these warranties only cover the original purchase by the original owner, so they won’t help if you bought a previously owned home with existing appliances.
There’s also the option of getting an extended warranty, which - as the name implies - extends the life of the manufacturer’s warranty. The terms and conditions for these warranties usually resemble the original manufacturer’s warranty, but they can often be obtained from third parties such as the store in which the appliance was purchased. Extended warranties are recommended for high-end or speciality appliances, but home warranties might be better if you want bundled coverage for home items that may not require specialized repairs.
Another option is equipment breakdown coverage: It offers many of the same types of coverage that a home warranty would, though it’s usually available through your homeowners insurance – and is often less expensive than a warranty. However, equipment breakdown coverage doesn’t cover wear and tear; a home warranty will.
Hopefully by now you’ve got a good sense of what a home warranty is (and you’ve also figured out those light switches), so you can feel a little less overwhelmed, and a little more excited, about moving into your new home.
All caught up on home warranties? Read up on roofs next.