This is an article about one of the biggest problems we face as buy and hold real estate investors.
What happens when our appliances break down?
How will we replace them?
The article brings up a sticky point about warranties vs. saving accounts.
You may probably be wondering if you should add some appliances insurance to your monthly mortgage payments. This is understandable when you consider that if your heating and conditioning equipment breaks, this can bite a large chunk out of your savings which you may probably have reserved for other things like mortgage payments, property taxes or regular insurance.
Actually, the real challenge is not so much whether to get an appliances insurance or not, but rather, which of the two to go for; a savings account or an insurance.
The Pros and Cons
Fortunately, there are no hard rules to the whole thing. You can either decide for the savings account, if you feel up to it or go for the insurance, if you feel this sounds better.
Some people reason that since modern appliances are built to last, it makes little sense to pay monthly or yearly premiums to cover them.
However, it is also good to look at the other side of the coin; most appliances break down during their warranty period. This ‘infant mortality’, as it is commonly called will usually be covered by the appliance guarantee or the store from where it was bought. But as it nears the end of its life span and eventually outlives its warranty it will increasingly fail more.
Thus, some people have opted to have appliances insurance to avoid paying for routine maintenance and repairs and instead save that dollar for other needs. While this may prove to be less cheaper than doing the regular repairs, it also has the advantage of one not having to worry about repairing and replacements.
Appliances insurance will usually cover all the repairs and maintenance issues. Sometimes, when several uninsured appliances break down at once, it can prove almost impossible to replace them all at once.
However, with insurance, all you have to do is make a call and explain your problem and sit back and wait to either get the equipment fixed or replaced, all without paying a dime. In such situations, it is usually way cheaper to have the insurance company cover the expenses.
Read the Fine Print
Companies have varying policies when it comes to appliances insurance. Some will demand an annual premium fee while others a monthly fee. Some companies will do repairs when the need arises while others will come to fix and replace appliances within certain time periods.
Depending on your need, it is thus important to carefully read the contract in its entirety. In this way, you will be able to make an informed decision.
Note: Another thing we recommend is to read Consumer Reports religiously.
We have bought everything from cars to vacuum cleaners to appliances after reading their ratings, and they are usually very close on the mark, which will save a lot of money in the long run.