Hidden Benefit(s) of Home Warranties

 

Not Just Peace of Mind

The most obvious reason to buy a home warranty?

To avoid an unexpected, budget-busting home repair — or several of them.

In return for an annual premium ranging from $500 – $1,000 (depending on coverage and home features), most such policies cap homeowners’ out-of-pocket expense for repairs.

That’s especially attractive for notoriously cash-poor, first-time home Buyers — and the homeowners who want to sell to them (in lieu of replacing aging-but-still-working appliances and HVAC, smart Sellers often include a home warranty with the sale).

Economies of Scale/Pre-Negotiated Costs

However, there are two other reasons for homeowners to consider a home warranty:

One. Convenience.

Unlike veteran Realtors, who know plumbers, electricians, etc. (or can buttonhole their colleagues for referrals), the average homeowner may not have such relationships.

Unfortunately, the worst time to find a reliable contractor is after the hot water heater springs a leak, the oven starts spewing smoke, etc.

By contrast, homeowners who have warranty coverage typically call a 1-800 number, which connects them to the appropriate contractor.

Two. Pre-negotiated costs/group discounts.

Home warranty companies not only have access to contractors, they often negotiate better rates due to group discounts.

Think of it like a hospital charging an uninsured patient $5 (or $50!) for an aspirin vs. 50¢ for those covered by an group plan.

While the insurers benefit from any contractor discounts, consumers indirectly enjoy the savings in the form of lower premiums . . .



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