Benefits of a home protection plan
When you buy a new home or replace your furnace, you might be offered a home protection plan. When it comes to protection plans on products and services you want to be covered, but you might wonder — is a home protection plan necessary?
What are home protection plans?
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Home protection plans are home service contracts that offer repair services and/or replacement of the major mechanical systems and appliances in your home, according to David Sobel, spokesman for Direct Energy. For an annual fee, a home service contract will protect homeowners against unexpected breakdowns, and provide low-cost service calls if breakdowns do occur, he said. Even if you consider yourself a do-it-yourself homeowner and like to tackle projects on your own, a home protection plan can be a good idea. It’s one thing to stain the woodwork or hang curtains, but tinkering with major mechanical systems like heating, air conditioning, plumbing, or major appliances can cause costly mistakes and more expensive repairs or replacements down the road. Sometimes, a home protection plan is offered as an incentive when purchasing a home. According to Zillow.com, protection plans can shield a new homeowner from unforeseen repair costs. Sellers do not always offer home protection plans to potential buyers. Zillow says that if the seller does not offer a home protection plan and you would like one, it is okay to ask the seller to provide one or even offer to split the cost with the seller.
What are the benefits of a home protection plan?
A home protection plan is meant to offer peace of mind in case a large appliance or mechanical system breaks down. Ideally, the plan will save you money as well. “You also have access to a high quality service contractor rated by other homeowners to ensure great service,” Sobel says. Some plans are built to suit a homeowner’s specific needs, so you won’t end up purchasing more coverage than you require. If you know you have an aging furnace, a protection plan can be put in place to cover the cost of breakdowns or repairs to just the furnace. Over time, these protection plans can save consumers money on the cost of service calls, as well as cost of parts and repairs.
What do home protection plans cover?
Depending on the plan, it could cover everything from a refrigerator to a sump pump to a whirlpool bathtub to a fire alarm system; but if you only want protection for certain areas of the house, there are a la carte plans available to suit your preferences. For example, there are plans to cover just HVAC systems, just plumbing systems, or just electrical systems.
What do plans cost?
Costs vary based on the services offered and what is covered. If you are considering a protection plan, it is important to weigh the cost of the plan against the cost of potential repairs. A whole home plan that costs $500 a year may be less than the cost to cover typical mechanical breakdowns a homeowner experiences in a year, Sobel says. “Many small repairs on plumbing, electric and HVAC systems can add up to $500 in one visit,” Sobel says. According to the University of Illinois Extension, homeowners should expect to spend 1 to 2 percent of the purchase price of their home each year on maintenance and repairs — that’s between $3,000 and $6,000 annually if your home is valued at $300,000. If you have an older home with systems that will need replacement, U of I Extension suggests it will be cost twice that. Replacing major systems including parts and labor adds up quickly. OldHouseWeb.com estimates replacement of a furnace between $1,500 and $3,800; a central air system at $2,600 to $3,500, and $2,500 to $3,500 to replace a hot water heater. If your home’s mechanical systems or appliances came with a factory warranty, be aware that factory warranties do not always cover as much as you would expect. Some of them cover only limited parts and no additional costs such as labor, EPA compliance costs, taxes, or disposal fees.
Cover with care
When choosing a protection plan, it’s important to do your homework and make sure you are getting a plan that covers what you need. You can research what’s available and see the cost of the various home protection plan options. If you have questions, your plan provider should walk you through the details of the plan you’ve selected. “Homeowners need to look for what is covered and not covered under the terms of the contract,” Sobel says. “There is fine print, but reading through it will help every homeowner on what to expect from the home service contract.” In addition, Zillow.com suggests asking about the duration of the coverage, options to extend it and what the terms are for changing or canceling it. To learn more about home protection plans, visit our plan page or enroll today.