Buying a home can be stressful on so many levels. Saving for a down payment. Finding the right real estate agent to represent you. Searching for the perfect Basking Ridge home. Putting in an offer. Then, waiting to hear back about whether your offer was accepted or not. Then, moving day. Whether you purchase a newly constructed home or an older property, you might consider buying a home warranty. This covers you in the event that a major component or appliance in your household breaks. But is it really worth the money? Only you can decide.
Home Warranty: Is it Worth the Money or Not?
What Does a Home Warranty Cover?
First, it helps to know what a home warranty actually covers. In most cases, a typical home warranty covers your HVAC system, plumbing, electrical, hot water heaters, and various appliances. Some companies allow homeowners to purchase additional coverage for the swimming pool, spa, pool equipment, and a second fridge. But in order for the warranty to be valid, you must properly maintain all the equipment listed in your contract. These warranties only last for one year. They must be renewed annually.
How Much Does a Home Warranty Cost?
The cost varies depending on how much coverage you request and which company you go with. On average, expect to pay around $350-$500 per year for a basic warranty. Tack on an additional $100-$300 a year to cover items not included in the basic policy. In addition to the annual fee, homeowners must pay a service fee anytime a repairman is sent out. If you need to have more than one item serviced, they might charge you a separate fee for each item. Service fees usually run around $75 a piece. Some companies allow you to choose your deductible, too. The more you pay for your premium, the less deductible you pay.
Should I Buy a Home Warranty or Not?
We experience very cold winters here in New Jersey. If your furnace dies, it can cost anywhere between $6000 and $8000 to replace it. Replacing the air conditioner unit could cost you $3500 to $7525. So, the $350 to $500 you pay for your home warranty might be worth the investment if something catastrophic happens. Even if you set aside an emergency fund, you might appreciate not having to tap into it if a warranty covers the cost.
Ultimately, you are the only one who can determine that. Remember: always read the fine print. Know what is covered and what isn’t. If you have any questions, ask them.
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