Last updated on February 19th, 2020 at 10:52 pm
A home warranty can be a great tool for saving money, but it can also waste money. To make sure that you get the former, you need to choose the right kind of plan from a reliable provider and to apply it in the right kind of situation. Not everyone can benefit from a home warranty, but if you can, it will be a great help in case of unexpected costs that have the potential to deal a severe blow to your budget.
How Do Home Warranty Plans Save You Money?
Home warranty policies aren’t like insurance, which cover you in case your property gets damaged by one of the things included in the policy. With homeowner’s insurance, those usually are fires, water damage, natural disasters, burglaries, etc. A home warranty, on the other hand, covers a portion of repairs when something goes wrong with your covered appliances or some part of your home.
When this happens, and the item is covered by your plan, you give the home warranty company a call. They send a suitable contractor who will provide an estimate and then complete the repair. If everything checks out, the home warranty company will cover the part of the repair costs outlined by the plan. Note that there are always coverage limits, so you might need to pay a part of the cost. However, your savings can be substantial and, most importantly, you won’t be forced to dip into your emergency fund to pay for unexpected repairs.
When is Purchasing a Home Warranty a Waste of Money?
On average, a home warranty plan costs about $400 to 600 a year, which doesn’t seem like much of an expense when you consider that the repair of some appliances can cost more than $1,000. And if your plan is good, and you can be sure that you will get the money you are owed in case of a breakdown, this type of protection is a wise investment.
However, there are some important factors to consider when you think about buying a home warranty. In some situations, these plans might be inefficient, and in others a complete scam. They definitely won’t be beneficial for you if:
- Your home systems and appliances are old and/or damaged from the start.
In this case, a home warranty will be a total waste of money because the plan will offer only a limited coverage. Such items are considered compromised, so you’ll have to pay for their repairs out of pocket. As they are most likely to break down, you will simply give away more money to a home warranty company.
- Your home warranty plan is bad.
Some home warranty companies have been involved in scandals, and many customers report that these providers do not honor their obligations. In many cases, they use clever loopholes in the contract to weasel their way out of making payments. Choosing a reliable company and a good plan with extensive coverage is key to avoiding this kind of problem.
How to Make Sure a Home Warranty Benefits You
First of all, you need to make sure that a home warranty plan you want to buy is reliable and that a company won’t go back on its obligations. This means doing a lot of research to assess the level of trustworthiness of different providers.
Start with the BBB website to see if the company is accredited and what kind of rating it has. Considering the specifics of this industry, it’s extremely rare for a home warranty company to have a rating above B, so don’t limit yourself to A+ providers.
Next, find out if the company has received any reputable industry awards. These are awarded by independent experts and often they provide recognition to smaller companies that are reliable but don’t have the fortune to spend on big marketing campaigns. Therefore, they might be overlooked.
Finally, you should explore consumer review forums, like Yelp and Google Reviews, but be sure to treat anything you find there with a pinch of salt. It’s a fact that people who had negative experiences are much more likely to share their opinion online. As no business that deals in customer service can avoid dissatisfied customers, these forums can give you a biased perception of the provider. Do not dismiss the information you find there, but make an effort to verify it through more objective sources.
Once you make a list of trustworthy providers, look into the plans they offer. Many companies have a limited selection of options. This is an issue because when using a standard plan, the costs may be too high. Therefore, it’s usually better to buy coverage from companies that offer flexible policies and terms. Even if their basic set of plans is small, some providers make it easy to customize them by offering optional coverage. It allows you to get the best value for money because you will only pay for what you truly need.
Who Can Most Benefit from a Home Warranty Plan?
All things considered, the people who can benefit most from a home warranty plan are:
- Homeowners of relatively new or renovated properties who have new appliances to protect.
- Rental property owners as they can use a home warranty company to solve a variety of property repair-related issues, thus increasing tenant satisfaction and reducing the turnover rate.
- Home sellers who can offer home warranty plans as an incentive for prospective buyers. They will be more willing to buy when they are sure that they have extra protection. According to surveys, homes with warranties sell 11 days faster and for $2,300 more, on average.
If you fit into one of these categories and you’ve created a shortlist of trustworthy home warranty providers in your area, you only need to choose a plan. Take your time studying the offers and comparing coverage details. You need to choose something that will offer maximum protection and that suits your home.
You should also pay attention to the claim filing terms. How much time do you have to file a claim? How fast will the provider honor it? When will you get your payout?
Always read the fine print to make sure that there are no loopholes the company can use to escape their responsibilities and saddle you with a huge repair bill.
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