4 Pitfalls of Home Warranty Plans

Most people don’t like to get hit with surprise bills for expensive home repairs. Unfortunately, appliances break – sometimes sooner than expected – which can leave you paying for a costly repair bill or a new appliance. Furthermore, electrical and plumbing problems can be even more expensive to fix. That’s why many people opt to take out a home warranty policy: a plan that pays a portion of the repair or replacement costs for your home’s appliances and major systems. While these plans might sound like a good deal at first glance, oftentimes they aren’t really that great of a money-saving investment.

1. Home Warranty Plans Aren’t Cheap

Just like any other insurance policy, you must pay a premium for a home warranty plan. You can end up paying several hundred dollars per year for home warranty coverage. However, the amount you pay can be significantly more. For example, if you have a big house, then you will likely have more things that need to be covered. If your home is older, then there are more things that could potentially break and need repairs. You can research different coverage options and their respective premiums online.

2. Most Plans Charge You For Each Claim

Typically, you must pay a deductible when filing an insurance claim. Home warranty plans are no different. You will pay a service charge for each repair visit. The amount varies based on your policy – but it can be as much as $100. Therefore, you have to add those potential costs to what you will be paying for your plan’s premium.

3. Coverage Limitations

What makes home warranty coverage appealing is not having to worry about paying for expensive repairs or replacements out of pocket. Unfortunately, that’s where a majority of home warranty plans come up short. Most contracts will have coverage limitations. For example, your policy provider might impose a $1,000 limit on electrical repairs and a $2,000 limit on heating and air conditioning repairs per year. Therefore, you will be stuck making up the difference.

4. Structural Issues Generally Aren’t Covered

While builders will typically cover any structural problems for 10 years after building a home, most home warranty plans don’t include structural problems. Therefore, if your home doesn’t have a builder warranty, then you will likely have to pay out of pocket for any major repairs to the structure of your house. That includes problems with the foundation, walls, bricks/siding, and anything related to the structural integrity of your home. However, if you are worried about having to potentially pay a lot for major home repairs, you should consider adding a rider to your home insurance policy that will cover those potential problems.

In short, before you take out a home warranty policy, make sure that you do a cost-benefit analysis first. Remember, you will have to pay a premium for coverage – just as you do with any other insurance plan. However, the amount you pay varies widely based on your coverage needs. If you do take out a policy, you will have to pay a fee each time you file a claim. Furthermore, most home warranty plans come with coverage limitations. Make sure you look over your contract closely. Lastly, structural problems are often the most expensive home repairs – which are usually not included in a home warranty plan.

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