Friday, November 3, 2017

Home Warranties Are Generally Good To Have

I am and have been a strong advocate for home warranties when purchasing a resale home. There are a lot of competitors in the marketplace and that has led to reasonable pricing. Typically a one year home warranty in our local market (Clark County, Washington) runs in the $375-$450 price range. The various companies all try to position them selves ideally in the market and that means that prices and coverage will vary. Which it the best for any individual is a bit subjective.

Objectively, these warranties often cover a great deal of potential problems in the home. Everyone should hire a professional home inspector and I have advocated for that as well on this blog. But home inspectors cannot see the future and what is working fine on inspection day could fail a few months down the road.

My experience with these warranty plans is mostly positive. bear in mind that the insurance company is not going to warranty an item that was already bad when you bought the house. Buyers should hold onto the inspection report as a claim made in the first few weeks of ownership will likely throw a red flag to the insurance company. The inspection showing proper functionality would serve to alleviate any issues an adjuster might have with the claim.

I have found that these warranties are highly valuable. They are relatively inexpensive if you think about it. $400 against a purchase that locally is almost assuredly over $300,000. Should a major issue occur such as a failed furnace or major appliance in the home the cost will be return multi-fold. If nothing happens in the first year the money wasn't wasted and I generally don't complain when nothing breaks in house. I am not sitting about whining about how perfect everything works, "Gee, I wish something would break, I am so bored..." Yeah, that isn't how life works. If nothing fails it's a big Gold Win, If something does fail, the insurance picks up the tab. Win.

These programs typically have a small service fee associated with a claim. $50 or $75 tends to be a common amount. The insurance company then pays to fix or replace the item. I personally had a furnace fail on a house I bought back in the 1990s. I had paid for a warranty and they came out and replaced the entire furnace. It was a $3000 job back in the day and I had paid around $300-$350 for the policy. That is the only claim I every made on a home warranty plan but that one claim has paid for every other policy I ever bought with a stack of cash as change.

Buyers should research the various companies a choose the plan best for them. Cheaper is not always better so pay close attention to what the basic coverage includes and what costs extra before choosing a plan. My experience is that most of these warranty companies have a solid claims service, but do your own checking and pick the best plan for you.

One final note about the difference between Homeowners Insurance and a Home Warranty Plan. They are two completely different things. homeowners insurance protects you and the bank lending on the home from disasters like a house fire, flood, earthquake, tree falling into house, etc. They absolutely DO NOT warranty anything in the home. If your home burns to the ground in a fire, the insurance company pays to rebuild the house and replace lost personal items that you have covered up to whatever policy limits you pay for. The home warranty pays to fix things that fail or wear out.

I highly recommend home warranties. Below are just a few companies offering plans. I am not affiliated with or making a specific recommendation for any of these, but I have some experience with all listed and they have been generally favorable.

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