HOME WARRANTIES
Whether you’re a homebuyer or seller, a home warranty can give you peace of mind. Also known as a home service contract, the home warranty typically covers mechanical systems and built-in appliances in the home.
Not to be confused with homeowner’s insurance, which covers damage from external forces, home warranties are designed to fill the gap between the original manufacturer’s warranty and normal wear and tear, according to HomeServiceContract.org.
Here’s how it works. If your air conditioning doesn’t work, or your dishwasher breaks, you contact the home service company and describe the problem. The dispatcher will send the appropriate licensed plumber, electrician or appliance repair specialist to service the call. Expect to pay a service fee of about $50 or higher for each visit.
Remember that home warranties don’t provide blanket service. They don’t cover repairs or replacement for pre-existing conditions or for elderly mechanicals that are beyond their useful lifespan. But they are good for emergencies if your toddler clogs the toilet trying to “wash” his teddy bear.
For home sellers, home service contracts improve the home’s marketability to homebuyers and diminish liability.
For homebuyers, warranties can absorb the costs of unexpected repairs or replacements. Extended coverage for non-built-ins such as clothes washers, dryers and stand-alone refrigerators is usually available. When you think about the wide range of systems and appliances that it takes to operate your home, a home service contract is a bargain at approximately $400 to $500 and could pay for itself with one use.
FLOOD INSURANCE
Homeowner’s insurance covers most losses due to storms, hail, pipe freezing, and the weight of snow or sleet, according to StateFarm.com, but it won’t cover water damage due to these events, advises TheSimpleDollar.com. It also won’t cover flooding due to leaking appliances, clogged sinks, broken toilets, etc.
So why isn’t water damage from catastrophic events like flooding, earthquakes and hurricanes included? “Adverse Selection” is an industry term that simply means that the insurer can’t collect enough in premiums to cover the risk. Some insurers offer private flood insurance to high-end homeowners in limited groups, or they may offer limited coverage to policyholders that are part of the National Flood Insurance Program (NFIP), a federal program designed to help homeowners with coverage for up to $250,000 for the structure of the home and up to $100,000 for personal possessions.
Most homeowners don’t need flood insurance, but to be certain, double check with your insurer what water damage is covered by your policy and if you need additional insurance.