Monday, May 06, 2013

6 Reasons Why You May Need a Homeowner Warranty

A homeowner warranty is a policy usually purchased by a homeowner prior to or at closing. The warranty covers the major systems and appliances of a home and includes repairing or replacing them when they break during the coverage period. The major systems and appliances covered vary from policy to policy, but they typically comprise heating, air, plumbing, electrical, hot water heaters, dishwashers, stoves, ovens and garage door openers. If a refrigerator and freezer were in the home when it was purchased or before the policy went into effect they are also covered.

Homeowner warranties are optional, but many sellers purchase them to reassurance buyers that any repairs or replacement of worn systems and appliances in the home will be covered and will not be an extra expense to the homeowner.  Homeowner warranty companies keep a group of trusted contractors in their database to handle repairs. If a repair or replacement is needed the homeowner calls the warranty company about the repair and the company calls one of its contractors to perform an assessment. 

The contractor makes repairs or replaces parts as necessary. The warranty company pays the contractor and charges the homeowner a small service fee usually less than $80 which is much cheaper than getting the repair fixed on your own. A homeowner warranty can cost up to $500 a year which is much cheaper than homeowners insurance and saves you more money in the long run. One repair can cost more than $500 so the warranty pays for itself. The yearly fee remains constant no matter the specifications or condition of the home.

Some homeowner warranties also cover swimming pools or septic systems such as sump pumps or wells, other warranties offer coverage for those items for an additional cost.  Unfortunately, homeowner warranties do not cover everything in your home.  Prior to purchasing a home read the homeowner warranty to verify what is covered and the terms and conditions of the warranty. Shop around to find the best homeowner warranty for your needs.

Homeowner's insurance covers against damage and loss caused by natural events or disasters out of your control such as flooding, wind, hail, tree damage, theft and fire. Homeowner's insurance policies are required by most lenders. Coverage for damage caused by natural disasters varies from company to company. Some companies will not cover earthquakes, flooding, and tornado or hurricane damage unless you purchase additional coverage for those items. Repairs or replacements can be covered under a homeowner’s insurance policy but if you have too many claims in a certain period of time your premium may increase. A homeowner warranty and homeowner’s insurance are not the same but are complementary. You should purchase homeowners insurance and a homeowner warranty.

Homeowner warranties usually don't cover the cost of systems or appliances that haven't been properly maintained. A home warranty claim can be denied, however, the homeowner will still have to pay the small service fee and cost of repairs.  Here are 6 reasons why should get a homeowner warranty:

  1. Protects costly unexpected repairs
  2. Reduces usage of credit cards or savings accounts to pay for repairs
  3. Helps homeowners who are not savvy about home repairs or have trouble finding a reputable contractor
  4. Saves money for homeowners who purchased expensive appliances and systems
  5. Provides ease of mind when purchasing a home and reduces stress about paying for repairs
  6. Covers systems and appliances that have been properly maintained
The final decision is yours. If you are disciplined with your money you can create a home repair savings account and put the yearly cost of a homeowner warranty into a high interest earning savings account, use that to pay for home repairs and have the luxury of selecting your own contractors in lieu of purchasing a yearly homeowner warranty.

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