Choosing whether or not to have a home warranty insurance policy is like deciding whether or not to buy the extra warranty on your car. It is a careful balancing act, weighing your chances for something to break down against the cost of the home warranty insurance policy.
What Is Home Warranty Insurance?
A home warranty insurance policy is different from your regular homeowner's insurance and the warranty that comes with a newly built house. Your homeowner's insurance covers damage to your home as a result of a major disaster. A builder's warranty covers major structural problems in the first year.
Home warranty insurance guards against breakdowns in major appliances and systems in your home. Depending on your home warranty insurance coverage, you pay an annual premium and then a service fee for the repair or replacement of plumbing, electrical wiring, dishwashers, ovens, etc. Some home warranty insurance policies may also cover other major appliances like refrigerators, washers and dryers, and “extras” like pools and spas.
You may purchase home warranty insurance when you are selling your home, when you buy a home or even when you have lived in a home for several years.
On the Plus Side
If you are selling your house, having home warranty insurance may help it sell faster. Your buyer will not have to worry about major repairs for the first year they are living in the home and any breakdowns will be fixed for a nominal service fee, dispelling post-sell disputes.
Home buyers can benefit from home warranty insurance because it helps give you peace of mind to know you will not have much out-of-pocket expense in the first year — at least as far as systems and appliances go. You have enough financial stresses with a new house, beyond the mortgage. So the relief of home warranty insurance can help you rest.
Home warranty insurance can help homeowners to save money when problems occur. For example, if your oven dies, it could cost about $800 to replace it or about $175 to repair it; but if you have home warranty insurance, you will only pay the service fee, which can range from $50 to $100, and the company will either repair or replace your appliance. Now, what if your heating system breaks down? This could cost about $300 to repair or $1800 to replace, but with home warranty insurance, you still pay the same $50 to $100 service fee for repair or replacement.
A Glimpse at the Down Side
Of course what happens if you pay for home warranty insurance for the year and nothing ever happens? You are out the money. Some home warranty insurance policies will raise your premium after the first year.
You will need to decide if home warranty insurance is a wise investment for your house based on the instances of breakdowns and the age of appliances and systems in your home. It may be a good alternative to simply tuck away “house money” each month to invest into repairs, rather than home warranty insurance.
D. Blair Thompson