PHOENIX--(BUSINESS WIRE)--When purchasing a home, consumers need to decide whether a home warranty is a worthwhile expense.
A home warranty policy is a form of insurance or loss mitigation that offers discounted repair services or replacement of a home’s appliances and major systems – things like an air conditioning unit, electrical and plumbing systems, and washer and dryer. Additional coverage for specialty items, such as swimming pool or garbage disposal, can be purchased as well.
Mike Sullivan, chief education officer with Take Charge America, a national non-profit credit counseling agency in Phoenix, says home warranties are fitting for some households, not so much for others.
“You may want to purchase a warranty if your cash reserves are low because replacing an appliance or repairing a faulty electrical system will cost a significant sum of money,” he said. “On the flip side, a warranty is likely unnecessary if you own a new home and are protected under a builder’s warranty, or if your home was recently renovated with new appliances and systems.”
Unlike insurance agencies, home warranty companies are not covered by insurance commissions nor are they highly regulated, so it’s important homeowners conduct their own research before making a purchase. Sullivan suggests the following:
- Visit the Better Business Bureau to find a home warranty company with an excellent rating.
- Determine your commitment level and find a policy that meets your terms. A one-year term is common for home warranties.
- As with other types of insurance, compare home warranty prices and coverage from multiple companies.
- Decide what you want your policy to protect. You can buy a basic policy to cover only your home’s major systems, or purchase additional coverage for items like a garage door opener or swimming pool motor. The more comprehensive the policy, the more costly the premiums, so determine how much risk you can bear before deciding what to protect.
- Read the fine print. For example, what day will your coverage begin? Are you clear about what’s covered in the policy – and what is not? What is the process for filing a claim, and is there a cost when you file?
Sullivan adds, “A home warranty may be a good option for you and your family, but do your part to ensure you understand the cost, coverage and terms of your policy.”
For more financial tips, visit Take Charge America.
About Take Charge America, Inc.
Founded in 1987, Take Charge America, Inc. is a non-profit agency that provides financial education services including credit counseling, housing counseling, student loan counseling and debt management. It has helped more than 1.6 million consumers nationwide manage their personal finances and debts. To learn more, visit www.takechargeamerica.org or call (888) 822-9193.
