Home Warranty Insurance - Worth The Costs?

When it comes to home warranty insurance, you really have to decide if it's worth the costs.

I have done a great deal of research on this subject before putting this page up on my website. If you have browsed this site much, hopefully you can tell that I'm all about helping you, the first time home buyer get the best possible deals out there.

This page will offer you some ideas to consider and perhaps help you determine if home warranty insurance is even worthy of your consideration.

First of all, exactly what is home warranty insurance supposed to cover for you?

Well, in a nutshell, this kind of insurance is supposed to cover several things related to the appliances and mechanical systems (electrical, plumbing, heating/cooling) in your new home. Home warranty insurance is not needed on brand new homes in most cases since the manufacturers warranties and the builder will cover these things in the new home for up to one year.

But if you are a first time home buyer, buying a used home, you may be looking at home warranty insurance so you can get a peace of mind as the new home buyer.

So I want to offer you the good, bad and ugly of this idea about buying it or not.

Good Things About Home Warranty Insurance for the New Home Buyer

• Peace of mind, if you have a breakdown, you will not have a big repair bill.
• When you need service on an appliance or mechanical system, make a phone call and pay a small deductible (normally about $50) no matter how long it takes.
• If it's paid in advance, you can pass it on to the next buyer when you sell the house.

The Bad Things

• You have to pay the deductible each time you have an incident.
• Most of the companies sent out by the home warranty insurance company are 3rd party contractors and they do minimal repairs hoping to upsell the job since they really do not get paid much by the insurance company for making the call.
• You cannot report multiple problems under one incident, so if you had a plumbing problem and a washing machine breakdown, you pay two deductibles.
• Depending on what home warranty insurance company you contract with, you could pay anywhere from $300-$1000 a year even if you do not use the service. Chances are you can save money by hiring a contractor directly when you have an incident.

Now the Ugly

• So many people have bad experiences when dealing with making claims and getting repairs made. Many of the companies cite the fine print of their agreements and deny your claims.
• Pre-existing conditions are not covered of course and the claim ends up denied. Then you are out the deductible.
• The third party contractor ends up stating that there was a lack of maintenance so the policy does not cover the claim. This is a major reply made by contractors so they do not have to do any repairs and just get paid for the service call.
• Almost always, the home warranty insurance company will only try and repair the problem, (put a band aide on it) thus another claim and deductible to be paid later. Seldom does anything actually get replaced.

If the seller is offering it to you as a way to clinch the sale, then fine accept it and do not pay any money into it. Just know that making a claim can and will be rather hard to get done. If it comes up for renewal since most sellers will pay just the first year of premiums don't bother to renew.

If you really decide to buy home warranty insurance yourself, then really do your homework before selecting a company. With my research, I cannot really find many reputable companies that have any good reviews on the internet about them. It really seems to me that most all of them have bad reputations.

My suggestion is to set up your own home warranty insurance company. Just put aside a small amount each month into a savings account. My wife and I actually set aside $100 a month for upcoming repairs and changes we plan to make on the house in the next few years. It's amazing how much money you can have in this repair escrow account within just a few years. In other words, put it into your budget. As a new home buyer, you will have repairs or things needing replacement sooner or later. Just plan for it.

I hope you find this information helpful.

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