When you purchase a home, you’re usually filled with a sense of excitement about decorating, arranging furniture, and imagining the memories you’ll create in the days to come. But a large part of owning a home is maintenance - that’s where a home warranty can help. Home warranties cover the cost of maintenance and/or replacement of certain appliances in your home, which can help relieve you — and your wallet — by minimizing the expenses associated with such pricey services.
Wondering if home warranties are worth it? Read on to learn more about what a home warranty is and what they cover.
What Is a Home Warranty?
When buying a house, the seller might offer a year-long home warranty included with the cost of the home. This warranty should provide protection and reimbursement for major appliances that need to be repaired or replaced after the sale. A standard home warranty covers systems such as the water heater, HVAC system, plumbing, and other big-ticket items for a monthly or annual fee. The home warranty is one of the top things your Realtor® should negotiate with the seller.
Once the original home warranty from the seller ends, you’ll need to decide if you want to purchase your own plan. Having a warranty is a smart investment if you run into an unexpected repair that’s outside your home maintenance budget. Instead of dipping into your rainy-day fund or having to wait to complete an urgent repair, you’ll pay a deductible and your home warranty will cover the rest of the cost.
To give an example, if your washing machine leaks, your homeowner’s insurance will probably pay for any water damage to the floors or walls, but it won’t pay to fix or replace your washer. That’s where a home warranty comes into play. If you have one in place, it will cover the repair or replacement of specified appliances, such as your washing machine, depending on the policy. Without it, servicing these major appliances could cost hundreds (and sometimes thousands) of dollars.
Standard Home Warranty Coverage
In general, a home warranty offers repair and replacement services on specific household appliances. For newly built homes, coverage usually is only good for a specified time period — for example, two years for HVAC, plumbing, and electrical systems; 10 years for structural defects; and six months for appliances. Home warranties that cover appliances and systems are also available for older homes as well.
Make sure you know what the warranty covers. A home warranty’s specific coverage varies by company and policy, so it’s important to read the policy to understand what is and isn’t covered. For instance, not all policies cover every appliance in your home. A policy might cover your refrigerator, dishwasher, and garbage disposal, but not your washer and dryer. The good news is that you can usually add on other appliances for an additional fee.
Home Warranty Coverage Limits
Something else to keep in mind is how much of your coverage you can use at any one time. Home warranties usually have annual coverage limits, meaning the provider will only pay up to a certain amount to diagnose and repair or replace each item covered in the policy, and there is a limit to the total amount it will pay for all claims made in a year.
With most home warranties you are also limited in which repair companies you may use to fix the problem. Typically you are required to use one of the service providers approved and provided by the home warranty company.
You should also be aware of the timing that the warranty is in effect. If there is a home warranty already on the home when you purchase it, you will likely be covered immediately. If you purchase it afterward, there’s likely a waiting period before you can make a claim, typically at least 30 days. It’s important to read the contract thoroughly to make sure you understand what is and isn’t covered, what your out-of-pocket costs will be, what the claim process is, and how coverage limits work.
AAFMAA Mortgage Services LLC Offers Expert Advice
Thinking about taking on the costs of buying a home — both upfront, out-of-pocket costs, and your estimated monthly mortgage payment — may feel overwhelming. To counter the possibility of an unforeseen problem with your new home, warranties and insurance policies can give you the peace of mind you need to feel confident that you won’t face an undue financial burden. So, more often than not, the answer to the question “are home warranties worth it?” is "yes."
It’s always best to get expert advice from someone who understands your unique needs. Contact the AAFMAA Mortgage Services LLC Team or call (877) 387-6856 today, and one of our Military Mortgage Advisors will gladly answer all your home buying-related questions, from home warranties to applying for a mortgage.