Purchasing your first home is one of the major moments of your life. It represents personal stability and a commitment to earning long-term equity. With the fluctuations of the stock market, a home can be a very intelligent investment. One of your major considerations when making your first home purchase is deciding what buyers insurance you wish to carry. Insurance represents an additional monthly or yearly expense, but it provides you with the peace of mind of knowing you’ll be protected if something unexpected happens. In this article, we will discuss the benefits of a home warranty.
No matter what else changes in your life, you’ll always need a place to live. Renting is convenient for short-term opportunities, but the money you spend on rent can never be recuperated. Your mortgage payment helps you develop home equity. However, unforeseen expenses can stress your budget. The best strategy for purchasing a house is to budget to make sure that there is flexibility for the unexpected. A home warranty can provide you with a set cost that will ensure unexpected developments never become so costly that you risk defaulting on mortgage payments.
What Is a Home Warranty?
A home warranty is a type of buyers insurance that protects you if your home appliances should fail. This type of buyers insurance comes in many shapes and forms, so it’s important to select the policy that best applies to your unique situation. Appliances can include items such as your furnace, air conditioning, water tank, washer and dryer, and so on. It is always possible to pick up a buyers insurance policy for anything in your home, but it is prudent for the buyer to do their own risk analysis to see if the failure risk warrants the policy cost in their unique case.
When Should You Consider Buyers Insurance?
Buyers insurance should be a consideration whenever you make a major purchase. Newly constructed homes often come with a builder’s guarantee for months or even years. However, even in cases where the home is new, you should know when the guarantee ends and have a plan in place for home warranty coverage to protect you at that starting point. Having a smart buyers insurance plan is the basis of a sound financial strategy that helps you protect your most valuable assets and preserve your peace of mind.
Home Warranties for Older Homes
If you are purchasing an older home, your financial strategy will probably rely more heavily on a home warranty plan. Older homes tend to have appliances that are approaching their expected lifespan. Home warranties cover items that are in satisfactory working order when you take occupancy and then help cover the cost if those appliances fail because of normal use. Imagine making a large down payment on a new home only to have the furnace fail within a few months of taking occupancy. This situation represents an unexpected expense at a moment when you are already feeling financially stressed.
The Limitations of Home Inspectors
Before purchasing a home, you will contract the services of a home inspector. The home inspector will spend a few hours going through the property to look for potential issues or concerns. However, it is important to keep in mind the limitations of what a home inspector can find. He will probably check to see if your furnace turns on, but he has no way of knowing if the internal components are in good working order. Remember that even new appliances have been known to fail within a few months of installation.
It is important to put the report of your home inspector in the proper perspective. Sometimes, they will inform you if an appliance is working, but it seems to be old and, therefore, a candidate for developing issues. You will have to interpret the findings of the home inspector as you consider your buyers insurance options. A positive report from a home inspector does not mean that buyers insurance is not necessary. The report only tells you the working condition on the date of the inspection and cannot, itself, be considered a guarantee that the appliances will continue to work in the upcoming months.
What Does a Home Warranty Cover?
A home warranty will cover the repair or replacement cost of major household appliances and other home elements which fail due to normal use. Keep in mind that most home warranty plans do not cover windows or doors, or losses that are incurred because of theft, fire, or another natural disaster. Some home sellers include a home warranty as part of the purchase price as an incentive to make their listing more attractive on the market. Here are some reasons you should consider buyers insurance for various specific appliances.
Hiring Trusted Technicians
Many home warranty plans include scheduling and hiring the best technicians for repair work. This is an excellent feature, especially if you are new to an area, and you have not yet researched the best local service providers. Your home warranty provider keeps track of the local professionals as part of their regular business interaction, and this saves you the time and effort of perusing reviews and making appointments.
Furnaces and Central Heating
Your furnace is the heart of your home, and if you live in a cold climate, it is imperative that you have a reliable heat source to protect your home investment. If your furnace goes out in the winter, your pipes could freeze, which can lead to very expensive damage. Freezing pipes can burst, which requires you to replace your whole plumbing system. If your mainline bursts, the high-pressure water could flood your house, which might render your home unliveable. Remember that your home warranty will only cover the cost of repairing or replacing your furnace, not the damages that are incurred by the product’s failure.
Repairing a furnace is not a repair that can wait until you are in a more comfortable financial situation. Repairing a furnace can cost hundreds of dollars, and replacing your furnace usually means a starting cost of two to three thousand dollars. Furnace repair and replacement are not cheap, and furnace failure represents the kind of catastrophic event that can severely inhibit your yearly budget.
Central Air Conditioning Systems
Central air conditioning systems have a starting cost of around two thousand dollars but could be significantly more expensive, depending on your home. If your air conditioning system fails, you are not likely to incur any additional damage to your home. However, living without air conditioning can be extremely uncomfortable and even hazardous to the health of the elderly or for people with other health problems. Having a working air conditioning system helps maintain the value of your home and is best to repair as soon as possible.
Kitchen appliances, like your refrigerator and stove, are vital to your living comfort. It is also possible to get buyers insurance to cover the cost of washers and dryers. Older appliances are often included in the purchasing price of a home and provide great savings as you transition into your new home. Even if the home has new appliances, you should consider buyers insurance because sometimes the purchase warranty does not extend to the second owner. If you intend to purchase new appliances when you move in, you will be able to rely on the manufacturer’s warranty for the first few years instead of a home warranty.
Hot Water Tank and Plumbing Systems
Your house will not be liveable if you do not have a reliable plumbing system. The passage of water through pipes erodes the material, and eventually, you will have leaks. Plumbers can be very expensive, and it is a good idea to have a policy that accommodates plumbing repairs, particularly if you live in an older house. A hot water tank can cost up to two thousand dollars to replace. For minor repairs, such as a faulty heating element, you will probably pay around two hundred dollars.
Electrical systems in older houses are subject to failure and are even a fire hazard in some cases. If there is a failure in your electrical system, it will interrupt the function of your furnace and other appliances, which can lead to expensive damages.
Roof leaks can lead to rot, structural damage, and mold. Some home warranties have provisions to assist in the payment of repairs for roof leaks.
If you have a unique situation or property, it is always a good idea to inquire with your insurance agency as to what coverage options are available. It is always more affordable to have protection against repair or replacement costs, and minimal premium costs allow you to forecast your yearly budget accurately. Insurance agents are always willing to work to find you the best coverage plan for your needs.
What Does a Home Warranty Cost?
Like any buyers insurance, the price of a home warranty varies depending on the type of coverage purchased. For a general price range, home warranties can be anywhere from three hundred to six hundred dollars per year. There are many home warranty plans, and some of them include a service call fee. You can think of your service fee like a nominal health insurance copay for a doctor’s visit. Many providers also offer flexible payment plans that include paying the home warranty as one lump sum or breaking it into payments. Some factors that can affect the cost of your home warranty are:
Size and Age of the Home Being Covered
More complex systems in your home can incur higher repair costs and, thus, necessitate a higher yearly premium. Remember that new homes are sometimes less expensive because you might qualify for a builder’s guarantee, and your appliances might still be under the manufacturer’s warranty.
Your Type of Home Warranty Plan
You can get home warranty plans that cover a single appliance, plans that cover multiple appliances, and premium plans that cover virtually every component of your home. It is important to understand the specifics of what is covered by your plan, and you should make sure that your insurance agent answers all your questions when you go in for a consultation. Ask your agent for specific examples of what is and is not covered to make sure you understand.
Extent of Coverage
Some buyers insurance plans have dollar limits on the amount of repair or replacement work that can be done per year. It is important to have a clear idea of the dollar amounts of the coverage guaranteed by your plan. When you are shopping for a home warranty plan, make sure to evaluate not just the cost of coverage, but the coverage amount. Although a cut-rate plan might offer a marginally lower premium, it could leave you on the hook for thousands of extra dollars in repair work costs.
Conclusion – Peace of Mind Through Buyers Insurance
Purchasing a home is an exciting time in your life. For most people, a home is the biggest investment they will ever make, and it represents the place where they will raise a family and create all their most treasured memories. But, as exciting as a home purchase is, it can also be overwhelming. Your yearly budget is only a projection, and unexpected events like loss of employment or the failure of major appliances can be moments of extreme stress. A home warranty is a great way to remove some elements of chance and provide assurance that you have protection in case something unexpected happens.
Home warranties are available at a relatively small cost, and many individuals find that their home warranty pays for itself many times over. When you are going through the paperwork of a major purchase, it’s important to set aside a bit of time to consider your options for a home warranty. The right insurance agent will be able to guide you to a plan that makes sense for your unique situation and can provide the right amount of coverage at the best possible price. If you are interested in discussing how a home warranty can work for you, contact the friendly folks at Absolute Choice Insurance today.
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