Peace Of Mind

THE ENDS AND OUTS OF HOME WARRANTIES

BY PETE ALFANO

Whether this is your first time through the process, or you have done it before, buying a house can be an exciting and daunting experience. However, the buyer then has to factor in the annual cost of property taxes and a homeowners insurance policy and estimate how much will be spent on utilities and updates.

What is occasionally glossed over or never considered enough is the cost of repairs, replacement, or routine maintenance of heating and cooling systems, electrical and plumbing systems, kitchen, and laundry appliances, and, if the house has a pool, the pool equipment. While a home inspection verifies that everything is in working order on the day of the inspection, it doesn’t mean something won’t break down soon after you move in.

This accounts for the popularity of home warranties. For an annual premium, they cover all or most of the repairs or replacement of major systems and appliances in the home. And if you are wondering, homeowners insurance does not cover those systems, it covers damage or loss from natural or man-made disasters such as fires, hurricanes, tornadoes, and floods.

For someone moving into a newly built house, a home warranty isn’t necessary during the first year, as the builder’s warranty should cover all systems and appliances. Many real estate transactions for older homes now include a one-year home warranty paid by the seller to protect the new homeowner. But whether you are keeping the appliances or bringing your own, repairs or replacements will be needed at some point.

Many companies offer home warranty protection in a competitive field, but essentially, the policies are similar. A company may offer three levels of protection, each covering more items or providing a larger allowance for a replacement. So, policies can range from $400 to $1,400 and more, especially if a homeowner wants coverage for pool equipment.

In addition to an annual premium, a homeowner pays a service charge of at least $50 to $75 and sometimes more when a technician arrives to fix the problem. The homeowner does not choose the vendor either, the home warranty company partners with vendors who contact you after the claim is made with the home warranty company.

Keep in mind how replacing appliances or systems works. For example, if the average cost of a new dishwasher is $500, but the homeowner wants to upgrade to one that sells for $1,200, then the homeowner will pay the difference. That means $700 plus the service charge, although that includes installation. This still represents significant savings, and it is up to the homeowner to decide whether the replacement cost and annual premium are worth the expense.

For some homeowners, the convenience, peace of mind, levels of coverage, and fixed annual premium make a home warranty policy another form of insurance. The downside to these policies is that premiums tend to increase from year to year, homeowners cannot choose their own vendors, and the premiums are not reimbursed if no claims are made over time.

There is also that extra step. The homeowner contacts the home warranty company, which contacts the vendor, who then calls the homeowner. That can delay service. The homeowner, however, always has the option of canceling a policy or changing the coverage. And because the home warranty business is competitive, discounts are usually available.

Choosing a Home Warranty Company

Picking a home warranty company involves researching its website online and comparing it to levels of coverage, annual premium, service charge, and reputation of its competitors. Forbes Advisor, Consumer Advocate.org, besthomewarrantyonline.com are websites that list the higher-rated companies, the levels of coverage, and side-by-side comparisons. When you have done your homework, call at least three companies to verify what you have read and see if they offer incentives to first-time customers.

Top Home Warranty Services, for example, list Select, Choice, and American Home Shield as amongthe best in Texas. Incentives can range from one or two free months of coverage to a fixed dollar amount reduction of the first annual premium. Some companies have now added roof repairs to their coverage, although that will increase the premium. However, consider that if your roof is damaged by a weather event, such as a hailstorm, then repair or replacement is likely covered by a homeowners policy.