SHOULD YOU BUY A HOME WARRANTY?

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Home warranties cover repair and replacement costs for appliances and other home systems that may break down. A home warranty can be purchased by either a home buyer or current home owner, and are often paid for at closing. Builders typically furnish an in-house warranty for their new homes and those plans operate differntly that those we are discussing here. Warranties from private warranty companies are different in that they cover homes of any age.

Find Out What the Home Warranty Covers

Standard home warranty coverage differs quite a bit by provider. Many standard home warranties cover plumbing, appliances, and heating and cooling systems. Some policies cover the roof. You usually have to buy extra coverage for private wells and septic systems and other high-ticket items.

In a Home Sale, the Buyer and Seller Might Have Different Coverage

A standard policy might not pay a seller's repair bill if the furnace dies before closing, but it will cover the buyer if that happens after the sale. Look closely at the coverage offered for your particular situation.

How Much Does a Home Warranty Cost?

Cost varies, but many standard home warranty policies range from $350 to $450--extra to cover special systems. To compare policies, grab a sheet of paper and list household systems down the left-hand side. To the right, make a separate column for each policy and check-off which items are covered by each policy.

How Long Is The Home Covered?

Most home warranty policies are effective for one year with an option to renew coverage upon expiration. The renewal cost is often higher than the fee paid for the initial policy. Ask each provider what its current renewal fee is so that you can compare costs.

What's a Co-Payment

A co-payment is the amount you'll pay when a repair person comes out to fix a failed system. Similar to a health insurance co-payment, it generally covers the entire cost of the repair. Co-payments. vary but are often in the range of $55 to $90 per visit.

Does the Warranty Provider Have Contacts in Your Area?

Make sure you won't have problems getting service if something fails. I know of one instance where a major home warranty company told a home owner that they did not have someone to send out for a water heater repair. The owner tried to get service for some time. Finally, the policy expired and the owner was told the company couldn't help. They did finally agree to honor the repair, but only a percentage of it. The bottom line: find out now if the company can provide service.

A (Good) Home Warranty Can Help Sellers

A home warranty makes your home more attractive to potential buyers, especially if appliances and other items are aged. If two homes are equally attractive to a buyer, the one that offers a home warranty might come out the winner. Providing a warranty offers a little peace of mind, since it gives buyers some help if something fails after closing. The price of a home warranty is minimal, and since the policy can be paid for at closing you're not out any cash until the home sells.

A (Good) Home Warranty Can Help Buyers

Home buyers are sometimes cash-shy after coming up with the funds required for closing, so making unexpected repairs a few months down the road can be a burden. If you can't afford to pay for a home warranty, ask the seller to include it as part of the purchase price. If the seller won't pay the entire cost, try to negotiate a split. Home warranties aren't perfect, but they do help protect you from the costs of major repairs.