Guest blog by Krupesh Bhat,

Real estate investors purchase, manage, and sell properties for monetary gain. While such acquisitions can be financially beneficial, there are several risks associated with real estate investments and sales. These risks can occur within several stages of the investment process. Structural hazards and system failures are primary examples where substantial damage may occur.

Of course, you can limit your loss by screening a property or conducting an inspection prior to acquisition. You could also hire a professional property management company. Common practice shows that it is a very wise step to protect your assets by also purchasing some form of insurance.

Over the years, the number of investors purchasing home warranties has gone up significantly.  During a real estate transaction, the seller can include a home service contract with the sale of their property. Therefore, if an appliance issue arises, the buyer will seek coverage from the home warranty company. This can provide the seller peace of mind and protection against lawsuits.

A home warranty can also be an appealing offer to the buyer. Purchasing history supports that most buyers prefer a home that is already insured by some form of a protection plan. Such plans can help them manage their budget and save them the trouble of locating a service vendor for an appliance failure.

Is this the same as homeowner’s insurance? The answer is no. They are very different entities, although they are both designed to cover household items.

Homeowner’s insurance covers damages resulting from crimes and structural hazards, while a home warranty covers appliance and home system failures due to mechanical malfunctions caused by normal wear and tear. Neither cover issues due to lack of maintenance. Click here to read further about home warranties and homeowner’s insurance.

More about Home Warranty Plans

Home warranties are service contracts that provide expense coverage for repairs and replacement of household appliances. The coverage usually begins with a standard, minimum package, with additional coverage options available. The coverage level selected is what decides the annual premium paid. Generally, annual premiums cost around $250 to $600. Since the basic plans are quite affordable, it is never a bad idea to purchase a warranty plan.

When you do purchase a plan, make sure you are clear with every aspect of it: what is covered, which repairs/replacements are excluded, what is the possible annual increment in the premium, etc. Always read the contract thoroughly before you make a commitment and consider getting a second, professional opinion. 

If you have never had a home warranty, try purchasing a contract for a single year and see how that works out for you.

Benefits of a Home Warranty 

● Increases property value
● Almost all major systems and appliances are covered
● Financial protection 

Author: Krupesh Bhat


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