Should You Consider a Home Warranty?
For a first-time homeowner, a home warranty may seem like a bargain — a peace of mind when considering all of the potential issues that might arise in the future. For some, the policy might be offered by the seller as an incentive, or provided by the buyer’s real estate agent as a gift upon settlement.
Generally, these policies are offered on homes that are not brand-new, and therefore not covered by a builder’s warranty. The question is, should a homeowner actively seek to purchase a warranty policy or renew one they received as a gift?
What Will You Get For Your Money?
Home warranty policies generally cost between $300 and $600, depending on the provider, coverage and location. Contracting with a reputable provider can considerably ease the financial burden and inconvenience of standard home repairs (although not those due to improper maintenance, which are not covered), for most structural components and appliances.
This may seem like a great deal, but there are a myriad of potential negatives to consider prior to choosing to shell out money for this type of insurance.
The Fine Print
Many states do not have oversight of companies providing home warranty policies, and therefore do not regulate how they handle claims. If this is the case, you will not have many options for recourse if you disagree with how your claims are handled.
In addition, loopholes in the policy contracts may make it difficult for you to receive warranty service; especially with policies that exclude pre-existing problems. You may end up arguing with the provider over whether a plumbing leak that has ruined your new hardwood floor was actually a result of recent damage or something that happened years ago — in which case, you might not receive any remuneration.
Finally, from a cost standpoint, most providers opt to repair instead of replacing malfunctioning equipment. Unfortunately, this may not be the best option for the value of your home down the road.
Making the decision to forgo several years of home warranty policy payments, which will cover the continual repair of your existing refrigerator and instead purchasing a new refrigerator, will greatly increase the value of your home when you go to sell it.