Home warranty pros and cons:
National Home Service Contract Association defines what a home warranty is and what one might look like/cover. If you look online, you will find mixed opinions if this is a must when buying or selling a home. The Ann Milton Realty Team breaks down the pros and cons so that you can make a better-informed decision.
A home warranty is much like the extended warranties that are offered when you purchase a major new electronic. They will cover the appliances and major systems in a home. This type of warranty is not to be confused with a homeowners insurance policy. It is typically purchased when buying or selling a home and is a contract with a monthly premium to cover repairs and replacements.
According to the National Home Service Contract Association, the average cost for a one-year home warranty is $400-500. More comprehensive coverage plans can average up to $800 and above. In addition to the monthly premium, you can expect to pay a service fee of $60-125 for a contractor to inspect the item that the claim is being filed on. A home warranty purchased for your principal house is not tax-deductible on your federal return. The same may be said for homeowner’s insurance. However, if you utilize a section as a home office, you may be able to deduct a portion of the home warranty. In addition, if the house is rented out, the IRS permits a deduction for the home warranty. (Check with your accountant for applicability for your situation.)
The Claims Process
With a home warranty in place, you can expect to see a set process take place when following a claim.
- Call the warranty company to register a claim.
- A contractor will be sent by the warranty provider to check the appliance or system.
- You will be charged a fee for the contractor’s services.
- The contractor submits a report to the warranty provider.
- If the warranty company deems that the claim is covered, it will pay for it.
- If your claim is refused, you will be responsible for the repair costs.
Why You May Want a Home Warranty
Let’s take a look at some of the reasons you might consider purchasing a home warranty.
- Offers reassurance and peace of mind. A house warranty reassures a homebuyer by offering some protection against home issues that emerge after the closing.
- Saves on unplanned expenses. When money is tight, a warranty may be able to assist with the expenses of repair/replacement of household appliances.
- Frees time. If a home system or appliance fails, it is as simple as filing a claim with the warranty provider. They’ll take care of the rest. No extra time is needed looking for contractors to give estimates or make the repairs.
- Sweetens the deal when offered by a seller. Offering the buyer a paid-up, one-year house warranty as part of the purchase may give some protection against buyer complaints about any uncovered faults or flaws after the deal closes. Providing a house warranty does not free the seller from the legal obligation to disclose any known defects with the property.
- Gives added cushion for North Carolina residents. Every year, North Carolina receives heavy rainfall and suffers the brunt of several thunderstorms. The state is likewise prone to high summer temperatures and low winter temperatures. During these climatic changes, home appliances and systems tend to be stressed. Extreme heat or cold causes electrical goods to overheat and depreciate faster. A house warranty, as opposed to homeowners insurance, covers losses caused by normal wear and tear. While your home warranty may not cover repair expenses for failures caused by external sources, it may be able to assist you if your things degrade quicker due to extreme weather conditions.
Cons to Home Warranties
- If your appliances are covered by their original manufacturers’ warranties, you won’t need a home warranty for them.
- A home warranty will not cover repairs if you know an appliance or system is failing, is improperly installed, violates code, or has not been properly maintained.
- The warranty provider may refuse to pay out because the appliance has an outdated component that should have already been replaced. The claim may be denied because the appliances or system was improperly maintained.
- The company may insist on fixing an item even though it is outdated or has had several repairs.
- There is minimal control over the contractor chosen by your warranty provider. You have little recourse if they are unprofessional. You also won’t have much influence over the brand and type of replacement components used by the contractor.
- The warranty company may refuse to cover certain high-priced products or will not cover a repair because it is not covered by the kind of warranty plan you have. It should be noted, however, that many plans enable you to add coverage for large-ticket components like heating and cooling systems.
In the end, a home warranty may help to reduce the out-of-pocket costs of repairing or replacing large-ticket items that may not have been budgeted for. The bottom line when determining if a home warranty option is ideal is to research companies and inspect the list of appliances that will be covered. In addition, consider having an inspector check out the appliances in the home to see if they have been properly maintained or have issues already.
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