Everything You Need to Know About a Home Warranty
When buying a home, it’s important to know all the expenses you may be confronted with. Replacing and maintaining systems, appliances and fixtures can easily cost you thousands of dollars. To help you budget for these unexpected expenses, consider a home warranty.
A home warranty can provide peace of mind to buyers concerned about potential costly repairs after the sale of the home closes. It’s a 1-year service contract between the homeowner and a home warranty company that covers repairs and replacements of most major home appliances and system components due to failure, standard usage, or other problems.
How does a home warranty work?
Home warranty companies have agreements with approved service providers. When something that’s covered by a home warranty breaks down, the homeowner calls the home warranty company. The company sends one of its service providers to examine the problem. If the provider determines that the needed repair or replacement is covered by the warranty, they complete the work.
The homeowner only pays a small service fee, plus money already spent to purchase the warranty. Most home warranty plans have a basic option that provides all homeowners who purchase a policy with certain coverage at no additional cost; however, it is possible for homeowners to add on optional components that will provide them with additional coverage and additional protection against certain types of problems.
Is a home warranty mandatory?
In Alberta, British Columbia, Ontario and Quebec, builders must offer a third-party warranty. Everywhere else in Canada, it’s up to you. Keep in mind that any members of the Canadian Home Builders’ Association must offer a warranty as a condition of membership.
In some cases, the seller may offer to purchase a home warranty on your behalf to provide peace of mind that any component of the home can be fixed affordably after the sale closes.
Is a home warranty the same as home insurance?
Home warranties and home insurance are two different types of protection for your home. Home warranties focus on the day-to-day issues that can arise in any home and will cover the costs associated with covered appliances and systems breaking down. Home insurance offers a bigger picture option that protects your home and all of its contents from loss or damage due to theft, fire, water damage etc., but won’t help with individual appliance issues or system breakdowns.
What exactly does this warranty cover?
Home warranties typically cover major components of large home systems like your hot water heater, HVAC system and plumbing. These warranties may also provide coverage for appliances or give you the option to add on extra coverage for things like swimming pools or an at-home spa. If you’re buying a new build, make sure you ask your builder about their warranty before you sign any contracts so you can learn more about what’s covered and for how long.
What does it cost?
The price of a home warranty will vary depending on the property type. Condos, duplexes, townhouses and single-family detached homes all have different prices because they require different coverage. Basic coverage usually costs a few hundred dollars each year, but extended coverage can be put on a payment plan if the company offers that.
You may have to pay a service call fee of about $85 – $135 each time the warranty holder has to request that a service provider visit your home for an issue. If that issue requires multiple visits, the homeowner may be on the hook to pay each time the service provider returns. Keep in mind that having a home warranty doesn’t mean you’ll never have to spend money on any repairs.
Claims aren’t always guaranteed to be approved and they won’t cover anything that hasn’t been properly maintained over time.
How long does the warranty last?
Home warranty contracts typically last one year. This is a renewable, 12-month contract that can be renewed annually. If you choose to buy a home warranty, it’s important to renew and pay promptly so you don’t have to worry about coverage lapsing.
A home warranty can be an incentive to buyers
If you’ve ever bought a home, you know how stressful it can be. Costs tend to add up faster than you expect, and the current state of the real estate market may have some buyers feeling anxious or unsure about pulling the trigger on a home, especially if they’re unable to get a home inspection for fear of losing out because of conditions. That’s why offering a home warranty to potential buyers can make the sale more enticing and give them some extra peace of mind knowing they’ll be covered should any issues arise after closing.
A home warranty may not be the perfect solution, but it could be a good fit for your personal situation. It not only helps you protect the biggest investment you’ll make in your lifetime and prepare financially for unexpected situations that may arise while you own your home, it also helps you do your homework and reach out to an industry professional to discuss your options when it comes to protecting your home and its contents by means of warranty or insurance.
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