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All Warranties are Not the Same: Picking the Right Warranty Provider for Your Needs

23 January 2018 No Comment

For existing home buyers, home warranties offer tremendous peace of mind. In addition to covering expensive repairs, within the policy limitations, such warranties connect homeowners with competent and honest repair professionals whose work is guaranteed by a reputable company.

Home warranties have advantages for sellers as well. If home inventory is high, a good warranty is an excellent selling point that gives your home an edge over the many other available homes.

Both buyers and sellers go through basically the same process to find the best home warranty.

Do You Need Protection?

If you’re a homeowner with a home to sell in a seller’s market (low inventory and high prices), a home warranty may be an unneeded cost, unless you pass on the warranty’s price to the buyer.

However, if you’re a prospective homeowner, this question is not quite as easy to answer. If you bought the appliances with a credit card, many of these cards offer extended warranties at little cost. Some even automatically double the manufacturer’s warranty at no extra cost.

Warranty Coverage

As the old saying goes, the devil is in the details. Always remember that the insurance company makes money by collecting premiums and not by paying claims. Keep that one simple rule in mind, and the evaluation process becomes much easier.

Most policies have very specific definitions for an appliance. A water heater is not just a water heater. Many policies cover the heater but not the tank. As another example, some policies cover refrigerators but not icemakers. Furthermore, the policy may not cover certain types of breakdowns, such as power surges or other third-party acts. And speaking of third-party acts, nearly all policies deny coverage if there is evidence of owner neglect.

The insurance company almost always defers to the repair technicians in this area, and many times, it’s not even possible to appeal their decisions.

A related consideration is the repair-or-replace option. The distinction may seem like minutiae, but it could amount to thousands of dollars. The insurance company usually only covers the fair market value of the appliance in replacement situations, so if you want another one, that could mean a large out-of-pocket expense. Once again, the insurance company usually defers to the repair technician in repair-or-replace matters.

Cost

This consideration is definitely the most important one for both buyers and sellers when they compare home warranty providers. For starters, there are basically three types of warranties:

  • Single appliance,
  • Multiple (or all) appliances, and
  • Appliances plus some structural items, such as plumbing and electricity.

A multiple major appliance home warranty usually costs about $200 a year; an appliance-plus-structural policy usually costs about $800 a year. In addition to the plan premiums, there are also other expenses to consider, mostly deductibles and copays. These vary greatly depending on the source, type of policy, and type of service. They may range between $60 and $125 per incident.

The right home warranty policy can mean peace of mind for buyers and a “Sold” sign in the yard for sellers.

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