A home warranty is different than homeowners insurance. Homeowners insurance is a definite must, but it only covers damage due to very specific losses such as a fire or natural disaster. What about normal wear and tire? This is where a home warranty would take effect.
Even if your appliances or heating and air systems are new, most manufacturer warranties are 1 year or shorter. A home warranty will cover those items long past the original warranty provided by the manufacturer. These warranties (depending on your particular coverage) will protect you from the unexpected costs associated with the A/C breaking in the summer, the heater breaking in the winter, or other appliances like dishwashers, washer/dryers breaking down at what always seems like the worst possible time. A home warranty could potentially save you thousands of dollars.
Are home warranties worth it?
The answer is, MAYBE!
Purchasing an investment property is a big expenditure–so it’s important to protect it. If unexpected financial surprises like an stove or HVAC unit breaking don’t work with your current cash reserves, then the fixed expense of a home warranty may be best for you.
Whereas if you can handle the unexpected expense of an appliance (or multiple appliances) breaking at once, then you might want to save the money on a home warranties and deal with the expenses as they come.
How new the appliances are, how long you plan on holding the property, the cost of home warranties available to you, and how much reserve you have available to you for unexpected expenses, are a few factors that play into the decision of whether or not you should purchase a home warranty.
How to Choose a Home Warranty:
- Do online research about the companies, compare price and coverage, and read customer reviews. Choose a company with a good reputation.
- Call the representatives and ask questions. Ask your real estate broker to recommend a home warranty company that their clients have been happy with.
- Consider your home’s particular appliances. What do you need covered? Do you live in an area where the weather is bad? Is the roof old? Does it get very hot in the summer, which puts strain on the Air Conditioner?
- How long do you want your coverage to last? Typical plans run from 1 to 3 years and some can be extended/renewed.