In some cases, a seller may offer you a home protection plan in lieu of an inspection. Before you get excited about a home warranty plan, make sure you understand what you’re getting, and what you’re not getting.
Home Protection Plans Provide Limited Coverage
The coverage you get with a home protection plan is limited. Home protection plans typically restrict you to a specific provider or one of a few providers, who have agreements with the home warranty company. Generally, you make a co-pay when someone comes out to your home to inspect a problem, and you may also have to pay a portion of the repair cost, depending on the terms of the plan.
Unfortunately, home protection services provide limited coverage. They may include many exclusions that prevent the plan from covering common home issues. For example, a protection plan may not cover damage to the structure of the home, or may only cover damage if it occurs in a specific way or during a limited time period. Realistically, these plans have as many exclusions as possible to avoid paying out. These businesses only make money if they pay out less than they take in, so they generally overcharge for these plans and do what they can to avoid making payouts.
Even if a specific repair is covered, it may only be covered up to a certain dollar amount. That means that you’d have to pay any costs over that dollar amount, or accept a less optimal repair just to qualify for the coverage. Over the long term, this can cost you far more than doing a repair properly in the first place.
Never accept a home service plan in lieu of a property inspection. Some sellers or home builders offer home warranty plans as a token of ‘good faith’ to demonstrate to buyers that there is no problem with the property, and that buyers are protected if a problem should occur. Unfortunately, because home plans cover such a limited range of issues, buyers may not have the protection they think they have if a problem should occur. Buyers should never accept a home protection plan in lieu of a property inspection. Buyers should insist on a property inspection, and if the seller isn’t willing to grant one, buyers should walk away from the property.
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