Home Warranty 101: The Basics

When you go a big box retailer and shop for a digital camera, you always ask if there’s a warranty.  When you walk into an Apple Center and purchase the newest MacBook, you ask for the warranty period.  Anything that is way too costly and that you “value,” you always want to feel secure about.  You want to have full use of it!  A house is something you value for sure, as it provides shelter to your family.  Naturally, there is a corresponding warranty for that!

Home warranty is an insurance policy that covers most of the major mechanical composition of a house or a condominium.  It’s like insuring the appliances in your house.  Normally, new homeowners do not buy a home warranty because new homes come with a builder’s warranty and thus one is not needed.  For old houses, it’s imperative that the buyer inspect every minute detail of the house.  If the house is bought without old and ‘pre-existing’ issues being noted, the home warranty company may reject  future claims.

The Advantages

First, buyers are more likely to buy a home that comes with home warranty insurance.  This is one of the best reasons for taking out warranty insurance on your home.

Second, you’ll have peace of mind.  When the system breaks down, the insurance company takes charge of the repair or replacement of faulty equipment.  At least, someone is in-charge of the mechanical headaches.

Finally, home warranty companies are just a call away whenever repair services are needed.  All you have to do is pay the flat deductible amount of approximately $50 and repairs can proceed, regardless of the total amount of time spent fixing the system.

The Disadvantages

Issue 1:  There is a charge per repair incident; this ranges from $50-100.

Issue 2:  Companies discourage multiple-problems incident reports.  Thus, you pay the deductible fee for every single issue even if all repairs are done simultaneously.  This can thus become rather expensive on the part of the complainant.  In such instances, it can be cheaper to have the issues addressed by calling on direct contractors.

Issue 3:  There’s an annual insurance premium payment.  If you think that repair in your domicile is pretty unlikely to occur, then, just save that $500-1000 fee and use this accrued amount if and when you need repairs done.

Issue 4:  Home warranty companies prefer repairs over replacements.  They typically do not replace anything unless the equipment is totally worn-out.  If you complain quite often, customer representatives may hang-up on you or, worse, ignore your claim on the grounds that you didn’t take proper care of the equipment in the first place.  This brings us to our next and final point.

Issue 5:  Contracts do not recognize system failures caused by lack of maintenance.

The cons, it seems, outweigh the pros.  For this reason, annual renewal for home warranty insurance policies is typically less than 25%, as opposed to 50-75% estimate of home warranty companies.

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