What Is a Home Warranty Policy?
For most individuals a home purchase will be the largest investment that they will ever make. Because of this, most owners take particular care and interest in protecting their single largest purchase. While home owner's insurance provides multiple forms of coverage to home buyers, it does not offer a full blanket of protection. A home warranty can act as valuable supplemental coverage.
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Use
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When buying a brand new home, the builder will typically offer a warranty over the span of two years covering appliances and basic problems. In this case, a home owner might not see the necessity of an additional home warranty.
Most home warranty policies are purchased with the sale of a preowned home. Home warranties are designed to cover things that home owner's insurance does not. Items such as HVAC units and water heaters that can be costly to replace, are just some of the standard items covered under a home warranty plan.
Additional Coverage
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In addition to the standard coverage provided by a home warranty plan, the buyer can opt to add additional coverage to major items in their home. For example, code violations, plumbing defects, and even appliances such as refrigerators and washer and dryer units can be covered under an expanded plan.
Of course, with an expanded plan there is an additional cost, however, the cost of yearly coverage can equate to being a benefit when items are in need repair or replacement.
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Cost
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The cost of a home warranty plan is based on a yearly bill. Depending on the selected coverage a buyer can expect to pay between $300 and $600 per year as of June 2010. In addition to the cost of yearly coverage most service calls will have a deductible. The deductible can range between $30 and $100 dollars for each service call.
Even if a buyer calls a home warranty company to look at several items in the home at one time, a service call fee is due for each item. In other words, if a buyer requests repair on a dishwasher at the same time as she requests repair coverage on a water heater, she will pay two deductibles for the service call.
Who pays
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According to an article in MSN Money, when making a home purchase, part of the offer is typically structured for the seller to pay for the first year of a home warranty. This does not mean that the buyer has to select the coverage that the seller uses or chooses for them. The offer is structured for a seller to buy either basic coverage or extended coverage. The terms of the amount, just like any other aspect of the offer are negotiable. If the home warranty cost is not structured into the offer, the buyer will have to pay.
After that first year of coverage the buyer is expected pay for any additional coverage requested. Regardless of who pays for the policy the buyer is still responsible for any and all deductibles resulting from repair requests.
Warning
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Just like home owner's insurance, a home warranty policy should be read carefully. It is wise for a buyer to review several types of coverages from different companies. Some companies will charge fees for certain items that is over and above the deductible. It makes fiscal sense to review these possible additional charges before signing on the dotted line.
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References
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