Moving into a new home can be nerve wracking on many fronts. First, there’s the process of finding a home, securing a loan, and negotiating a price and conditions. Then you add on top of that coordinating the move and figuring out where to unpack everything. By the end of everything, there’s a good chance you won’t remember what papers you signed, specific conditions of the negotiation, or where you happened to put your sanity. Then the air conditioning unit suddenly quits.
You remember your real estate agent saying something about a homeowner’s insurance policy or a home warranty or something of that nature, but you can’t even remember where you put the large stack of papers you received at closing, let alone know what you’d be looking for. Let me help. You’re going to want your home warranty paperwork. In fact, you’ll want to keep your warranty company’s number handy from here on out. Once you get figured out what it is that you’re looking for, find that number and post it in a safe, convenient location like the inside of a cabinet.
The difference between a home warranty and homeowners insurance is that a warranty covers your home’s systems and appliances, while the insurance covers the structure and belongings. Your air conditioner that broke on the hottest day of the year while you were moving in? That’s a system and is covered by the warranty. If you have a major event in your home like a fire, some types of water damage, or burglary, you’ll want to file a homeowner’s insurance claim. If your oven stops working or your refrigerator starts to leak, those would usually be covered under the home warranty. As you can see, they are very different policies and cover very different incidences. A home warranty should never serve as a replacement for homeowner’s insurance.
Not sure if you have a home warranty? Just ask your agent. There is a very good chance that you do. If you have bought new construction, the builder usually supplies the one year or extended warranty as a guarantee that they have used high quality appliances and installed your systems and those appliances well. Older homes aren’t left in the dust, however. Frequently a seller will obtain a warranty for their buyer as a guarantee that they have properly maintained their systems and appliances. If you’re buying an older home and the seller hasn’t offered a warranty, it’s completely negotiable in the contract. However, you’re free to buy one yourself as well. Warranties usually cost between $300-$400, depending on the level of coverage you obtain, so most people will tell you that they’re well worth the peace of mind.
So what do they cover specifically? You’ll have to refer to your policy for that information, but generally systems like air conditioning, plumbing, furnace, and electrical; and major appliances like your washer, dryer, and refrigerator. Though for an additional cost, you can get more coverage. Some things you may want to consider covering are your stove, dishwasher, and swimming pool.
Though it may seem like a winning situation all around to have the coverage, there are a few things to consider. Coverage will depend on maintenance. If the system that breaks hasn’t been properly maintained, the warranty company will not cover it. One of the biggest complaints about this pitfall is who determines what “properly maintained” means; and that’s usually defined by the company. You can usually appeal their initial findings, but be prepared to hear “no” again. You also don’t have the freedom to choose your contractor or repairman. The company will already have relationships with contractors of their choosing. You’ll also have to pay a service fee for any time a repairman or contractor comes to your home. Though minimal, usually between $50-$100, it is a little jarring to most warranty holders that that charge isn’t covered by the warranty.
With all that in mind, it’s a good idea to talk to your real estate agent about getting a policy. If your home comes with one or if one is negotiated into your contract, that’s great. If not, your agent will have some suggestions of companies to look into depending on your specific situation.