By Carol Trehearn
Home warranties are similar to home insurance policies. There are deductibles, restrictions, and a wide array of choices.
If you buy the wrong policy, you may find it doesn’t cover what you hoped it covered. Here are three tips for picking the right home warranty. We’ll also give guidance on what to look out for so you don’t buy a warranty that comes with more hassle than real help when things break.
Many home buyers accept the default warranty offered at closing because it is free. If you’re buying a new home, the home warranty may be included as part of the purchase price of the home. And it may be offered as an incentive by home sellers.
While this leads many to secure their first home warranty, remember to check the price of the warranty relative to the coverage. It could be worth it to pay a few dollars a month for broader coverage if a major piece of equipment like the AC breaks down.
You can also buy home warranties on your own, and you will have to pay for one yourself if buying a foreclosed home or a short sale.
Home warranties range from the basic to the extensive. Most home warranties won’t cover pool pumps, for example. Basic home warranties often defer to the cheapest option or the surest option. Expect warranties not to cover the cost of the work if it is less than a hundred dollars. This deductible applies to each repair, so if you’re constantly having small things repaired, the warranty may not cover any of it. And you could run into problems if the company keeps making little repairs that never hit the threshold that causes the home warranty to kick in.
Review home warranty companies to see if they have a history of making the cheapest minimal repair like replacing starter caps that keep burning out instead of fixing the root electrical problem or if they require you to pay for the more expensive and extensive repairs, even if replacing a cheaper part may fix it. In some cases, the contractor approved by the home warranty company has limits on what they can do and charge, and you’ll have to pay more out of pocket for extra services like maintenance on the system after the repair that other contractors may throw in for free.
You may also want to have extensive documentation on any problems with the equipment when you buy the house because some home warranties will refuse any claim if they can say it was a pre-existing problem. Your home warranty might not cover things like accidents so it’s also a good idea to know what might be covered under your homeowners insurance.
Compare the coverage of the warranty compared to the price; you may want to pay a few more dollars per month for more comprehensive coverage. Understand the coverage so you don’t buy policies that don’t cover what you need and vet home warranty companies for those that make life miserable as they try to keep each repair cost to a minimum. Understand the requirements regarding maintenance records and service providers.