How many of you have had the experience of closing on your home and then having an appliance go belly up within the first few days of new home ownership? I really think it’s a Murphy’s Law sort of thing. I’ve worked with buyers who bought great homes and they’ve still experienced this frustration during what should be a time of celebration. Of course, your homeowner’s insurance policy will cover catastrophic damage and if you’re buying a newer home, the old owner’s builder warranty might cover your expenses, but what happens when you buy a home with an expired policy? The short answer is that you’re on your own and those repair bills can really hurt the pocketbook. I recommend that all my clients purchase a home warranty policy for their new homes, especially if they’re a first time home buyer with little home maintenance experience.
A home warranty is not the same thing as homeowner’s insurance. Typically, homeowner’s insurance is hazard insurance, and covers items damaged in fires, by water, by wind or other covered events. A home warranty repairs or replaces items that break down on their own through normal wear and tear. A home warranty covers any home, no matter what the age as well as any brand or manufacturer of systems and appliances. Usually, home warranties are one year contracts and range from $440 to $574 per year, depending on the level of coverage. The premium alone is often less than the deductible you would pay filing one claim against your homeowner’s insurance, the cost you’d pay a repairman or the cost of purchasing and installing a new appliance.
So how do they work? Although specific plans provide for specific types of coverage, most operate the same way. If a home system or appliance breaks, the home owner calls the home warranty company. The home warranty company then calls a provider/technician with which they have a business arrangement. This provider will call the homeowner to make an appointment. If the technician cannot repair the problem, the warranty company will (depending on contract coverage) pay to replace and install a new appliance. Some policies require homeowners to pay small trade service fees which are usually less than $100.
Like any coverage, all plans differ, so you want to do your research and ask what is covered. Ask about upgrades to traditional packages and pay close attention to whether or not the home warranty company will pay for repairs to certain types of systems or appliances compliant with new regulations. Make sure you have a specific list of what is covered by the warranty. Typically covered items include air conditioning units, dishwashers, doorbells, furnace/heating systems, water heaters, duct work, garbage disposals, indoor plumbing clogs, ceiling fans,electrical systems, ranges and ovens and telephone wiring. Some policies exclude refrigerators, washers and dryers and garage door openers, so be sure to ask for a list of exclusions, as well.
My own home warranty is managed through … HMS National. Myagent, Bill Smith, can be reached at (800) 456-5799 Ext. 202 and would be more than happy to help you wade through the details about how you can best protect your home and your pocketbook.