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Do You Really Need a Home Warranty?

As a homeowner, you want to make sure that the single largest investment in your life stands the test of time. Homeowner’s insurance is a no-brainer. You probably also invest in other things to safeguard your home, your family, and your possessions.

Does a home warranty fall into that category? Can one of these agreements actually help you ensure that your home delivers the return that you need to see? Is it worth it? What’s the best home warranty for 2020? Let’s take a closer look below.

What Is a Home Warranty?

First, let’s establish what a home warranty is, as that’s essential for determining whether or not it makes a good investment of your hard-earned cash. Some homeowners may assume that buying a home warranty isn’t necessary because they have protection from their insurance company or from the manufacturer of their appliance or system.

Sadly, that’s rarely the case.

A home warranty is actually not insurance, nor is it a warranty in the sense of the protection you receive from a manufacturer. It’s really a service contract that offers peace of mind and protection for your investment above and beyond what’s covered by other options.

For instance, if your home burns down, then your insurance company will cover the cost of repairs and replacements. However, what if your five-year-old oven stops working? The insurance isn’t going to cover it, and you’ll be well outside of the manufacturer’s warranty. This is precisely where a home warranty offers value. Without this contract, you could be on the hook for thousands of dollars to replace that appliance. With such an agreement, though, you will usually only need to pay your deductible and the warranty company will repair or replace the appliance as necessary.

Now, take that example and apply it to all of the high-cost appliances and systems in your home. Most home warranties will cover things like the following:

  • Oven
  • Stovetop
  • Built-in microwave
  • Central heating and air
  • HVAC ductwork
  • Refrigerator
  • Washer and dryer
  • Water heater
  • Plumbing
  • Electrical wiring

Plus, all home warranty companies give you the chance to purchase protection for optional items. Say you have a swimming pool – how much would it cost you out of pocket to purchase a new pool pump or heater? A home warranty can cover those items and many others with the right options. Based on the information above, you do need a home warranty. Of course, that begs the question of how you choose the right one for your needs.

How Do You Choose the Right Warranty?

Now that we’ve established that a home warranty is definitely well-worth your consideration, we need to explore how you find the right agreement. Really, it all starts with knowing your needs.

What do you want to cover? Some companies offer “barebones” coverage that only protects your most expensive appliances and systems. Others provide a comprehensive plan that offers protection for almost everything in your home. What do you want to protect?

Most home warranty companies offer a budget-based plan, and then a higher tier that expands coverage. However, some companies offer five or even 10 different plans that can be customized to suit your needs, budget, and lifestyle.

You also want to compare your options when it comes to home warranty companies. They’re certainly not all created equal. Some are very respectable, with excellent reputations and very satisfied customers. Others are disreputable with lots of complaints against them. Make sure that you compare companies on a head-to-head basis, with an eye for some of the most important considerations, such as:

  • # of BBB complaints
  • BBB rating
  • Transfer fee
  • Cancellation cost
  • Plan selection
  • Average customer review
  • Age (time on the market)
  • Chance of claim denial
  • Delays in repairs (usually tied to customer reviews)

Does a Home Warrant Benefit Home Sellers?

As a homeowner, a home warranty will offer significant peace of mind, plus financial savings. However, what if you’re selling your home? If you are putting your home on the market, you need to ensure that you have as many competitive advantages as possible. For most of the US (with some notable exceptions, like California), it’s a buyer’s market, meaning that buyers have their pick when it comes to available properties. There are many things that you’ll want to do to help your home stand on for potential buyers, like:

  • Cleaning up the yard and investing in some landscaping
  • Cleaning the exterior and/or painting the home
  • Painting the interior of the home
  • Taking care of minor repairs to spruce the place up
  • Maximize key selling points, like location, unique features, large lot size, and other appeal-related factors

However, one of the better ways to attract the interest of potential buyers is to offer peace of mind and protection that will save them money in the long run. A home warranty can do just that. How? Here’s how it works.

In most cases, homebuyers are pretty strapped for cash once the deal is done. They’ve had to pay closing costs, inspection fees, and so much more. They don’t have a lot of extra cash on hand to deal with unexpected issues, like replacing a failed appliance or troubleshooting an HVAC system that’s not working quite right. By offering a home warranty included with the sales price, you are telling potential buyers that they don’t need to worry about those issues.

Home warranties are usually transferrable (depending on the company), although there may be a transfer fee associated with your policy. They are also good for a year and can be set up to automatically renew, which can save potential homebuyers time and hassle in the long run.

In the End

When everything is said and done, investing in a home warranty is a smart decision. These contracts can provide you with essential protection and peace of mind, helping you save potentially thousands of dollars on covered appliances and systems. Additionally, they can also be used as a sales tool, helping you attract the attention of interested homebuyers if and when you decide to put your home on the market. Really, investing in this type of coverage is a no-brainer.

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