Home service contracts, or home warranties, are an important consideration in the home-buying process, especially for new homeowners.
“Homes are a major financial investment, and repairs and replacements on appliances and major systems can cost anywhere from $700 to more than $3,500,” explains Tim Meenan, CEO and executive director of the Service Contract Industry Council (SCIC). “While new homeowners face numerous expenses, a home service contract can guard against these unexpected pricey repairs and replacements.”
Generally, a home service contract covers repair or replacement costs of major systems or appliances that fail within the contract period—often one year. This may include coverage of the home’s electrical system, HVAC unit and plumbing system. Typically, the contract can be renewed annually. Most contracts come with a nominal service fee, paid at the time of the incident.
Aside from monetary coverage, the home service contract provider will refer the buyer to a vetted contractor who can perform repair or replacement work—a boon to buyers new to an area.
Most homeowners with home service contracts call upon the contract provider two times or more each year.
The SCIC strongly recommends first-time homebuyers negotiate a home service contract before committing to a home. If you’re new to home-buying, discuss your options with your real estate professional—he or she can offer counsel for your circumstances.
The peace of mind, Meenan says, is worth it.