While sitting around a table of local realtors this past weekend enjoying a socially distanced beer, the conversation naturally drifted to the obscure topic of home warranties. Because we occasionally receive questions from our clients on home warranties, and the alternatives most insurance agents offer I thought I'd provide eight things you need to know about home warranties as well as two insurance options for your home systems.1. Home warranties are not insurance. They are an annual service contract covering some or all the systems of your house to protect you from large, unexpected repair bills or system replacement.
2. Most home warranties are purchased when moving into a new home, but some are actually available years later.
3. Home warranties are often a great option for first-time homebuyers who may not have the experience handling or budgeting for home maintenance & repairs.
4. Failure to provide routine maintenance may void your warranty so keep those receipts and service tickets.
5. All home warranties are not created equally. For every satisfied customer I hear from, I hear at least as many horror stories. On my daughter's first house the home warranty company wanted $1,500 for replacing her 'covered' water heater. She eventually replaced it for $400 with the help of a loving uncle in about 2 hours.
6. Home warranties are pretty expensive, or pretty cheap depending on your point of view and the circumstances that arise during the warranty period. Expect to pay $300-$500 per year.
7. Home warranties only cover the 'unknown.' Issues that a home inspection uncovered or should have uncovered are typically not warrantied.
8. Home warranties have exclusions. All the systems you think are covered may not be, especially that septic system. Make sure to read the contract and talk with your realtor or others who have the same program you are considering purchasing.
A home warranty might just be right for your situation and now you know what to look for as you evaluate the contract language.
Two insurance options you might consider for your home if you like the idea of a home warranty are Equipment Breakdown and Service Line Protection. These two endorsements, which I consider the best value in insurance right now, expand the protection offered under your homeowner's protection to protect some of those same systems you might protect with a home warranty at about 15-25% of the cost of a typical home warranty. You can even extend protection to the underground utility lines servicing your home (think power, water & sewer) as well as items less likely to be protected by home warranties like security systems, home automation systems, pool maintenance equipment and home electronics like televisions. While these two options don't mirror a home warranty's protection, they are an alternative or inexpensive additional layer of protection. Ask your insurance agent for details on Equipment Breakdown and Service Line Protection.
