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Homeowners Warranties

You’ve gone through the process of getting a mortgage loan, found the home you love and are finally ready to move in. Moving day arrives and you get into your new home. No sooner have you just settled in and the air conditioner breaks down. What now?

Not an uncommon problem. What happens when something goes wrong with your house and you just moved in? You now own the home and it is your responsibility to make repairs. One option is to have a homeowner’s warranty. A homeowner’s warranty is an insurance program that offers buyers of a home a warranty against certain physical defects, such as faulty roofing, heating, electrical services and plumbing.

This insurance premium is a relatively low cost to repair major defects in a home. New construction is covered by a national program and there are many excellent programs that you can purchase for existing homes.

One thing to remember is that as coverage increases and the more items you want to have covered in the policy, the more costly the insurance becomes. For example, if you wanted to cover all appliances, you have to weigh the cost of increasing coverage with the replacement cost of an actual appliance. The increase in insurance premium may be higher than the actual cost to replace that faulty stove.

The cost of a homebuyer’s warranty can be covered by the buyer, seller, and real estate agent or sometimes in new construction, it becomes an added benefit that the builder will buy to avoid future liability. This is due to the fact that very often in new construction, it is often the builder that has completed defective work, so an inexpensive insurance policy becomes a necessary cost to protect against significant defects.

As with all buying decisions, make sure you shop around as there can be a significant difference in what is covered and the cost of coverage.

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