If you buy a brand new home in a pre-planned development, then you might get told that your home comes with a warranty. The warranty would cover all of the systems (plumbing and electrical) and any structural features for probably 10 years, and all of your appliances would be covered for maybe six months. That is part of homeowners insurance, right? No, it is not.
What is a Home Warranty?
There are several types of home warranties, but they generally cover wear and tear on things like your roof, your furnace, your appliances, and a variety of other features. If your hot water heater starts leaking and you have a home warranty, then you may be able to get the work done for a cost that is much lower than replacing the water heater. Each home warranty is different and you should shop around to find the one you like.
Home Warranty Versus Homeowners Insurance
If a tree branch falls on your roof and causes damage, then you use your homeowners insurance to address that problem. If your roof starts leaking due to age, then you would use your home warranty for that situation. Homeowners insurance is there to protect your investment and care for your family if your home is damaged, robbed, burnt to the ground, or flooded. A home warranty is there to take the financial pressure off when something goes wrong in the course of usual wear and tear.
Homeowners insurance, in most cases, is considered mandatory by lenders. After you have paid off your mortgage, it is still a good idea to have homeowners insurance to protect against disasters. Home warranties are usually optional, but they are also a good idea to have to help save you money.
What does a Home Warranty Cost?
Home warranties vary widely in their costs, but the average annual fee for a home warranty is between $600 and $750 per year. Depending on what you want covered and how your want your warranty to operate, you might even pay more. As the home warranty business matures, more options are being made available to help people get the coverage they want at prices they can afford.
Some home warranties allow you to use their policies without paying anything more than the premium, while other warranties have a per incident deductible that could range anywhere from $100 to $500. Be sure you understand the deductibles in a home warranty before making your purchase.
Should I Get a Home Warranty?
It is not unusual for home sellers to get a temporary home warranty that covers anything that could go wrong with the property for the first three to six months that the new owner occupies it. A warranty may cost you a little each month, but your home will sell faster and you should be able to raise your asking price as well.
A home warranty could cost you a few hundred dollars a year, but it could save you thousands. Before you sign on the dotted line with a home warranty company, be sure to do some research and make sure that the company you have chosen has a strong reputation. A home warranty teamed up with homeowners insurance can be a great combination to give you peace of mind.