In a tough housing market, appliance insurance -- more commonly known as a home warranty -- can make the difference in a successful sale. As a buyer, you gain protection against any future problems. As a seller, you’re telling the potential homeowner that you’ve got his back. Like with anything, however, appliance insurance has both gifts and gotchas.
What Is It?
A home warranty protects major home systems like central air conditioning and kitchen appliances for up to one year. If something goes wrong within that time, homeowners can call the warranty company, which will send a technician out to fix the problem. If the buyer likes the plan, she can renew it year after year. The cost of such a warranty averages $250 to $400 per year or higher. However, as a seller, you do not have to pay for the warranty until after the transaction closes.
For the seller, a home warranty prevents calls from irate buyers who may threaten to sue because of unforeseeable breakdowns. It also avoids unexpected expenses after the transaction is finalized. For the buyer, the insurance avoids expensive repairs right when the budget is depleted for the home purchase. He won’t have to search for reliable repair staff in an unfamiliar town; he just calls the warranty company. If the company cannot fix the problem, it will replace the defective appliance. As a bonus, home warranties also typically cover plumbing and electricity, which do not have to relate to any appliances.
Only mechanical breakdowns are covered. Damage from Mother Nature, such as from flooding, or loss from theft is not. So appliance insurance does not replace homeowners insurance. The warranty might contain exclusions such as washers and dryers, though you might be able to buy additional coverage, such as for swimming pools and hot tubs. Although the repair and replacement is free, the service call warrants a fee ranging from $30 to $50, which can add up if an appliance must be repaired several times.
Don’t assume that a warranty will protect a certain appliance or home system just because someone says so. Read the fine print on the contract. Find out if any conditions are excluded, such as mold or water damage, or what appliances are not covered, such as solar panels or solar water heaters. How many times must an appliance be repaired before a replacement is authorized? Is there a dollar limit and warranty on the repair itself? How soon after your call will the company send a service person? Be sure to keep records of your maintenance on appliances, advises Reba Haas in “This Old House.” “If you can’t show you’ve taken care of items covered by your policy, your provider might refuse to replace them if they break," she says.
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