When someone purchases a home, it is an exciting time. They have made a huge investment and have the property they have always wanted. Tree-lined streets, a short commute to work, beautiful architectural components -; what is not to love? However, this so-called “honeymoon” period will end eventually.
Once a structure reaches the 10-year mark, the appliances and systems may begin to have issues. For homes that are older than this, improper or non-existent maintenance may cause issues that will significantly impact a person’s finances. This is when having home warranty coverage may be invaluable.
For example, if the home requires asbestos remediation, it can cost over $30K. If there is a termite infestation, it can require $4,000 or more to eliminate the pests and another $10K to fix the damage that has occurred.
Does this mean that a person should give up their dreams of having an older, stately home? The answer is a resounding “no.” It is possible to reduce these costs and keep things manageable. By remaining diligent about a home inspection, it is possible to miss any type of hidden surprises. Along with this, having a home warranty contract can help to reduce the costs related to wear and tear.
Keep reading to learn more about how a home warranty may help a homeowner save thousands of dollars per year on repairs for an older house.
Homeowner’s Insurance Will Not Solve Everything
Most people believe that their homeowner’s insurance will cover any issues that may arise with their home. However, this is just not the case. For example, homeowner’s insurance will not cover claims for wear and tear. If the wiring in a home happens to short-circuit, cutting off all the power to the second level, the insurance policy is not going to cover this.
Some people wonder why this is the case. After all, this type of extensive electrical work can cost more than $20K to perform. Even though this can be a huge financial blow, homeowner’s insurance is designed to protect the holder from any type of unforeseen disaster.
Even though most insurance providers are going to exclude “Acts of God,” such as floods, they will provide coverage if someone steals from the home or if a fire occurs. It is impossible to predict these things, but problems that occur due to maintenance can. Home systems and appliances have a set lifespan. Because of this, homeowners can plan for when they need to be repaired.
Due to this, there is no type of homeowner’s insurance policy that is going to cover maintenance, regardless of how expensive it is. This leaves so many homeowners in a jam. In the modern world, it is more difficult than ever before to save money.
In fact, according to a study conducted by the Federal Reserve, it was discovered that up to 40% of Americans are not able to cover a simple, $400 unexpected expense. Another study showed that approximately 80% of Americans are living paycheck to paycheck. Unless someone is making over $100K a year, how would it be possible to put back a maintenance fund?
Since most people are not able to do this, it makes more sense than ever to invest in a home warranty.
What Is a Home Warranty and What Will They Cover?
At this point, some people may wonder, what is a home warranty? This is a type of service contract that provides a homeowner with more predictable home maintenance costs. If something goes wrong, it is possible to call the home warranty company and they will send a technician to the property to make the necessary repairs.
Now the question is, what will home warranty companies provide coverage for? These plans are designed to cover the maintenance of two areas of the household -; the appliances and the systems. The contract’s scope will vary from one company to another, so keep this in mind. For example, one home warranty company may cover humidifiers, while another will not. There are some companies that provide as much as $3,000 in repairs for an air conditioner, while other companies are only going to offer a cap of $500.
Almost all systems plans are going to cover electrical, plumbing, and climate control. If someone shops around, though, it is possible to find plans that will cover other elements, such as the home’s ductwork, sprinklers, and sewer lines.
When it comes to appliances, all the top plans will cover dishwashers, refrigerators, and stoves. However, there are many companies that also offer coverage that is more comprehensive. For example, there are some that will cover ice maker repairs, air cleaners, trash compactors, and more.
Before getting in touch with a firm, it is a good idea to identify every appliance and system in the home. At this point, it is possible to look at the reviews of the home warranty companies online. These are going to provide insight into the companies that are best set to meet the needs of the homeowner.
What Is the Cost of a Home Warranty?
The next step in this process is to get a quote for this coverage. The question that has to be answered, though, is how much will the home warranty cost a year? Based on information from some consumer advocate groups, a home warranty cost will cost around $300 up to $600 a year.
Even when it comes to an older home, such as one that is 50 years or older, it is possible to find annual deals that will cost less than $1,000. As opposed to more serious maintenance emergencies, which may cost thousands of dollars initially, all that has to be paid is a yearly or monthly premium. If the home warranty company sends someone to the home, they will have to pay an additional service fee, which is usually $60 up to $125 for each call.
A homeowner can figure they will pay somewhere between a few hundred dollars and a little more than $1,000 each year for their home warranty. While this may seem like a lot, the fact is that it is much more affordable than having to pay more than $4,000 to re-wire a home.
What Home Warranty is Right for a Homeowner?
There are all types of plans offered by home warranty companies. Each one is designed to suit the different needs that homeowners have. If this is the first time a person is shopping for a home warranty plan, it may be difficult to choose the one that best suits their needs.
The first step in this process is to evaluate the age of the home. If the home is new and has state-of-the-art appliances in place, purchasing a home warranty may not be necessary. The cost of this one-off repair is going to be less than the premium that must be paid.
However, if someone has purchased a house that is over a decade old, they should think about investing in a home warranty. When a home has reached this age, the appliance and home system components will likely begin experiencing serious issues. According to some models, it is much more cost-effective to purchase a home warranty than to cover repairs out of their own pocket.
It is also a good idea to check the review sites that are evaluating different home warranty companies. When the top warranty companies are found, it is possible for a homeowner to find the one that meets their budget and needs.
When it comes to concerns related to budget, it is important not to just consider the service fees and premiums being charged. It is also necessary to think about coverage caps. The last step is to review what real customers have said about the warranty company and the coverage they offer. Take some time to read several reviews to get some insight into the companies being considered.
Who Will Get the Biggest Benefits from a Home Warranty?
There are two groups that will benefit most from a home warranty. This includes people who own a house that is more than 10 years old and people who have invested in real estate. Remember, appliances and systems are going to wear out once they reach the 10-year mark. This means that purchasing a home warranty is not only a smart strategy but one that will ensure the desired results are achieved and that a home is protected.
The other group of people who are going to benefit from home warranties is landlords. The cost savings are very evident when it comes to older homes. Also, home warranties are going to result in time saved, which makes them valuable for new properties, too.
When it comes to buying a home warranty, it is clear there are times when it makes sense and other times when it does not. Keep the information here in mind to know when this is an investment that should be made. Being informed is the best way to ensure the desired results are achieved.