Homebuyers who purchase new construction usually get some type of warranty from the builder for the home’s materials and workmanship, including plumbing, electrical, heating and cooling systems for one, two or up to 10 years. Although appliances are often not covered by the builder, they generally come with a manufacturer’s warranty. In this case, it is not worthwhile to purchase a home warranty for a newly built home because you will wind up with duplicate coverage.
However, buyers of existing homes have no guarantee they are covered for replacement and repair if something stops working in their new home. One way for these buyers to protect themselves against the risk of costly repairs is to consider purchasing a home warranty.
What is a home warranty?
A home warranty is a contract covering repairs and replacements on systems and appliances in your home, usually for a period of one year and may include coverage of all the parts and components of your home’s electrical, plumbing, heating and air conditioning systems as well as many other home appliances.
Difference between a Home Warranty and Home Insurance
Home warranties are designed to protect your home’s appliances and systems from breakdowns caused by normal wear and tear, while homeowners insurance pays for damages and loss caused by unexpected events such as fire and weather damage.
How a Home Warranty Works
A home warranty works similarly to any other insurance policy. Each year that you want to be covered under the warranty, you pay an annual premium. This can range anywhere from a few hundred to a thousand dollars, depending on the size of your home. Usually, homes of up to 5,000 feet in size are covered under the standard warranty; above that you have to pay for additional coverage. Thereafter, each time something in your home breaks down, you pay a deductible. The exact amount of your deductible will vary, according to the terms of your warranty. The warranty company will send out a service to make the necessary repairs, or they will replace your appliance, if needed.
Estelia Mesimer (REMAX/Metro) has been active in St. Petersburg’s real estate market for over twenty years. When it comes to home warranties, she says, “The best deals can often be secured if purchased at the same time you buy your home”.
The plans usually offer the most the all-inclusive coverage at the best price points. According to Estelia, “It’s the ideal time to lock in the warranty contract.”
As an investor herself, Estelia recommends home warranties for landlords who do not want to field repair calls from their tenants. “If you have a home warranty, you can cut right to the chase, thus keeping your tenants happy and minimizing your stress.”
Benefits of a Home Warranty
- The biggest benefit to a home warranty is peace of mind. If something breaks, you know that a professional will come out and fix it, no questions asked. For this reason, a home warranty is a good choice for homeowners who are not very handy. It can also be beneficial to first-timers who may not be as familiar with how their new home’s systems work.
- Existing issues with your systems and appliances should be found during your home inspection and addressed prior to you taking ownership of the home, if you negotiated repairs and replacements. Warranty companies consider problems identified during a home inspection as “known conditions” and often do not cover them, but they generally will cover “unknown conditions,” issues that would not have been revealed through a normal home inspection or ones that develop after you move in.
- It can be a wise money move for those who need to budget carefully or like to be ahead of the game with their financial planning. Why? With a home warranty there are fewer unanticipated costs. You will know what your premium costs upfront and you will know what your deductible is for any repairs that are covered under the warranty, making it that much easier to handle the unexpected.
Downside of Home Warranty
- The most obvious drawback is that not everything is covered so you will need to read the specific terms of your plan to get a sense of the individual exclusions. A home warranty will not cover appliances that have not been “properly maintained”. This clause is often the cause of disputes between the homeowner and the warranty company, particularly if the previous owner did not take care of the appliance and now the new homeowner is left holding the bag.
- Another drawback is that each year money is paid upfront under the assumption that repairs will eventually need to be made; however, that may or may not be the case. Some years everything may work fine, but you’ll have paid the premium.
Florida’s Top 4 Home Warranty Companies as rated by This Old House
American Home Shield (AHS): Best Overall
Choice Home Warranty: Best Service
Select Home Warranty: Lowest Deductible
First American Home Warranty: Best Value
Bottom Line: The cost of a home warranty ranges from $350 to $600 a year, more if you want coverage for such things as washers and dryers, pools and septic systems. In addition to the annual premium, expect to pay a fee for service calls – anywhere from $50 to $125, depending on the type of contract you purchase. Without a home warranty, you could spend hundreds or thousands of dollars repairing or replacing major appliances or systems. If you don’t have money set aside for these expenses, a home warranty can more than pay for itself.
St. Petersburg Communities
If you’re interested in any of these of communities or live in one of them and are thinking of selling, call Estelia today!
Greater Pinellas Point
Historic Old Northeast
Historic Roser Park
Isla del Sol