For most people, a home is the most expensive purchase of their lives. That’s why buyers often employ home inspectors and look for ways to make contracts contingent upon the property’s systems and structures being sound.
Even with all that due diligence, it’s impossible to guarantee that your central air conditioning won’t conk out three months after you move into a house. That’s the gap that home warranties attempt to fill.
It’s not insurance
A home warranty, also known as a home service contract or residential service contract, covers breakdowns in built-in household appliances and systems due to normal use. Insurance covers damage or liability from an unknown event. If your water heater fails and floods your home, insurance covers the damage but not the water heater. A home warranty, however, covers the repair or replacement of the water heater.
How much does it cost?
A contract for a home warranty varies depending on location, but around $500 per year is pretty standard. If you want coverage for items beyond the usual list, such as a pool, you’ll pay an additional $75 to $100 per year. Regardless of your plan, you’ll pay a service fee each time a repair person visits your home; that’s usually $75 or $100 per visit.
What’s your appetite for risk?
You can’t know when something will fail. But if you’re buying an older home with original systems, it can give you peace of mind to know you won’t be facing huge repair bills. Whatever you decide to do, make sure you compare warranty providers and carefully read the exclusions on their contracts.
A home warranty test drive
Home warranties are popular incentives for sellers to offer. The seller typically pays for one year of the warranty, and you’re responsible for any service-call fees. You might want to ask your seller if such an incentive is available.