That old Benjamin Franklin quote about the only two things certain in life being death and taxes isn’t entirely accurate. Another certainty, at least when it comes to homeownership, is that things will break down eventually. Water heaters, dishwashers, furnaces, fridges, pipes, and all of the other things that make your house tick don’t last forever. Repairing or replacing big-ticket items such as appliances, plumbing, or HVAC systems can cost a pretty penny, and are usually not covered under home insurance policies. That is why many Chicago home buyers are offered home warranties during the purchase process. But what is a home warranty, what does it cover, and is it worth it?
What Is A Home Warranty?
While a homeowner’s insurance policy covers major perils like fires, property crimes, weather damage, and some flooding issues, a home warranty covers the costs of repairing or replacing major components of your home when they break or fail. A warranty may also cover major appliances and other items like swimming pools or hot tubs.
As with a claim you make under your homeowner’s policy, you would call your home warranty provider when something covered by the warranty breaks down. The company then will send over one of the service providers with whom they have a contract. If the provider determines that the warranty covers the needed repair or replacement, they will complete the necessary work. You would only pay a nominal service charge for the repairs, far less than you would otherwise pay.
Warranties can cost several hundred dollars a year in premiums, depending on the property type and the extent of the coverage.
Upsides Of A Home Warranty
The most obvious advantage of a home warranty is that it will spare a homeowner from many of the substantial costs involved in repairing major home components. It can provide peace of mind, especially for individuals who simply don’t have the resources available if and when something goes wrong. It may also make sense for homeowners who aren’t particularly handy.
Limitations Of a Home Warranty
Companies that issue home warranties have one important thing in common with those that provide homeowners’ insurance: they are in business to make money. Every dime they have to pay out for a covered repair is a dime out of their profits. That means they may try to find every possible reason to exclude a claim.
That is why it is crucial to understand the terms and exclusions of any warranty you purchase. Not only may a warranty exclude specific items from coverage, but it also may contain more nebulous exclusions that the company could try to rely on to deny a claim. One of the most common exclusions warranty companies cite when denying a claim is improper maintenance. Most warranties will not cover items that have not been maintained as recommended. This can lead to frustrating battles about what constitutes proper maintenance and whether it was performed in a given case.
Bottom Line
Like choosing what kind of home to purchase and where to purchase it, the decision as to whether to buy a home warranty is primarily based on the priorities, preferences, and proclivities of the buyer. If freedom from the economic and practical challenges faced when things break down is important to you, a warranty may make sense, so long as the terms provide the coverage you want at a price you can afford.
However, if you are in a position or have the inclination to fix any problems when they arise, it may not be worth it to pay a bunch in premiums in a given year when nothing may go wrong.
If you are looking to buy or sell your Chicago home and have questions about how home warranties fit into the process, please reach out to one of the experienced agents at Z Chicago.
