When you own a home, you must understand the financial commitment that comes along with this responsibility. The expenses of monthly mortgage payments, repairs, maintenance, and insurance can be difficult to manage. You look for every opportunity possible to save money and keep more of your hard-earned cash in your pocket. If you want to save on repairs, a home warranty is an excellent choice.
This benefit provides many advantages for homeowners, especially those who live on a tight budget or may not have a sizable emergency fund. To understand how this can happen, you must first learn how a home warranty works and when it can help you out. Regardless of your financial status or the state of your home and the items inside, this coverage can be beneficial for now and for the future.
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How It Works
If you have a mortgage, you are required to have homeowners insurance. This policy protects you financially if there is loss or damage to your home and certain components of it. You can file a claim and get help in the event of a disaster such as a fire, burst pipe, windstorm, hail, or falling objects that cause problems. It is also applicable when theft or vandalism destroys your property.
A home warranty plan is a different type of benefit, although there are similarities. Your plan will pay to repair or replace certain items that stop working properly due to normal wear and tear. The warranty also applies to these issues if they occur unexpectedly or suddenly. You can file a warranty claim for appliances, such as your water heater, washer, dryer, refrigerator, dishwasher, built-in microwave, and garbage disposal. It also works for your roof and sprinklers, as well as the HVAC, plumbing, and electrical systems.
Your home warranty will be in effect for one year from the date of purchase. When it expires, you can renew it at any time thereafter. Your appliances do not have to be new for a warranty to cover them.
Examining the Costs of a Warranty
Some plans give you some options of paying for the warranty per month or all upfront when you buy the plan. The costs can vary, but most will be between $300 and $700 annually. You will also have to pay a fee for a service call when the repair technician comes to your home and diagnose the issue. A service-call fee is typically as low as $50 but not ordinarily more than $150. This will depend on the provider and the type of repair that you need.
The Cost of Repairing Appliances and Systems
Fixing broken appliances and systems in your home can be expensive. Sometimes, the costs may be so high that you will have to put off fixing them and live without the convenience they provide. Even small repairs on an appliance can be $100 or more. More extensive repairs on items, such as a fridge or dishwasher, can be a few hundred dollars. When you need to fix the electrical system or touch up some plumbing issues, the costs can rise to around $1,000. Of course, the cost variation will depend on the appliance model and the extent of the damage. Still, you can expect to make a big financial commitment to get your item up and running again.
The Cost of Replacing Appliances and Systems
Sometimes, a problem with a home item can be so severe that no type of repair can get it up and running correctly. In these situations, you may have to install a new one. New appliances can cost several hundred dollars or even into the thousands, depending on the brand and the features that come with them.
Where the costs get considerably high is when you have to put in an entirely new HVAC, electrical, or plumbing system. Replacing the roof can be expensive, too. For these issues, you can expect to pay several thousands of dollars or up to the $10,000 range, depending on the size of your home. Homeowners also face a significant expense when the sewer line breaks or backs up. If the problem is bad enough to require replacing the line, the bill could reach into the tens of thousands of dollars.
Look at the Comparison
If you are wondering whether a home warranty is worth the cost or whether you will save any money by making this investment, consider how much you would spend with or without this protection. For example, if you need to replace your dishwasher, you can expect to spend between $300 and $1,500 or more. The chances are this will exceed what you will pay for a warranty for the entire year. Now consider what your costs would be if you had to fix multiple items in your home.
Having warranty protection can save you hundreds if not thousands in a year. This can give you peace of mind and reduce stress and anxiety, especially if you have an aging home with older appliances and systems.
Limitations and Restrictions
Be aware that your plan may not cover every cent of the repair or replacement costs. Your home warranty will come with an annual payout cap per item. Depending on the home warranty you choose, this figure can vary. Your plan may cover as little as $500 a year per appliance or system, or it might allow for up to $5,000 or more per item. Be sure you understand these limits before you purchase a warranty.
Even if you have to pay some money out of pocket once you hit the cap, you will still likely spend less than if you did not have a warranty. This is true, especially when replacing a system or appliance or when the repairs are complicated.
Right now is a good time to purchase a home warranty. If you are worried about your finances and what would happen if you had to make major repairs, a warranty is right for you. You don’t have to be in a difficult financial spot when these issues arise.