When to Buy a Home Warranty: Before or After Closing?
A home warranty is always a good idea. Whether you are a first-time home buyer or on your second or third home purchase, your new home is new to you. A new to you home with hidden issues waiting to cost you more money. A home warranty is protection against likely problems you will encounter, like a broken appliance, rather than the unlikely problems that homeowners’ insurance covers. But when is the best time for your purchase one?
What is a home warranty?
A home warranty works like the warranties you are used to for your car and home appliances. Except a home warranty plan will cover all systems and appliances in your house for a specified length of time. Unlike a manufacturer’s warranty that comes with your appliances, a home warranty is a warranty you purchase and pay a monthly premium on. A home warranty will cover the normal wear and tear on all of the parts and components of the systems and appliances in your home.
But how is a home warranty different than insurance? Homeowners’ insurance covers big, unexpected life events like floods or fires. It doesn’t cover the things you expect to go wrong with a new house purchase, like a broken stove or a failing HVAC system. Those expenses can add up, leaving you without the money to do the things you want to do in your new home.
Why is a home warranty important?
No matter what size home you bought, it is a purchase that you want to protect. A home warranty is a protection plan for that new home. A home warranty will cover the everyday costs that come with a new home. Most sellers won’t replace older systems and appliances before selling. This could leave you with a very expensive problem. A home warranty is protection against that possibility. It is a protection plan for your budget. If you are not handy with projects around the house, a home warranty will allow you to have a service person handy, with flat fees you know upfront, for projects that arise. A home warranty will also protect you if you purchased a home at the top of your budget and don’t have much cash handy in reserve.
Buying a home warranty
Many buyers will negotiate a home warranty as a part of the purchase of a new home. This warranty is purchased by the seller to cover any unexpected issues that could pop up in the first year or two after the sale. When not negotiated as part of a home sale, some buyers will choose to purchase a warranty before closing, especially if they are purchasing an older home with issues that were noted in the home inspection.
You can buy a home warranty whenever you want. It doesn’t matter if you haven’t closed on your home yet or lived in it 1 month, or 10 years. Your coverage options will not change based on when you purchase the warranty. The good thing about home warranties is that most home warranty companies will offer options that can be custom tailored to your home. Many will offer plans tailored to electrical or plumbing systems, plans for appliances only, or plan add-ons that will cover pools and spas.
Pros of a home warranty
When making the decision to purchase a home warranty, consider the age of your new home. Older homes most likely will have older HVAC, electrical, and plumbing systems. They are also likely to have older appliances that will be outside the manufacturer’s warranty. In that situation, a home warranty is a no brainer.
The monthly cost of a warranty plan can seem like a con to many. Why purchase a plan that you may not use? But consider the cost of replacing an HVAC system or buying a new stove. Those are unexpected expenses that are guaranteed budget busters. Investing in a home warranty will save you those expenses in the long term.
The cost of new systems or appliances is not the only money that a home warranty can save you. With a home warranty, you have a guaranteed serviceperson on call. No more shopping around to find an affordable contractor who is available when you need them. With a home warranty, you are guaranteed to avoid service call fees and will only have to pay an affordable, flat fee for any covered service call.
Cons of a home warranty
If purchased after closing, a home warranty will be slightly more expensive on a monthly basis.
Plans that are purchased before closing will often qualify for a lower rate, resulting in a lower premium. Another thing to consider is the age of the appliances and systems in your home. If your home is full of newer appliances, they may still be under the original warranty. These warranties only typically last 12 months. A home warranty will last as long as you choose. As with all warranties, you may not need to use it.
Home warranties offer peace of mind as you settle into your new home. They allow you to budget for the unexpected. With a home warranty, you can plan for all the visions you had when you first saw your new home. Having a plan in place for unexpected expenses will allow you to budget for renovation or remodeling projects you want to tackle. A home warranty will help protect you and your budget from the unplanned expenses that will knock your home ownership plans off course.
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