If you’ve just bought a home, you might have also purchased or received a home warranty. The thing about home warranties is, you tend to expect more from them than what they can actually deliver.
Just to clear things, home warranties are not insurance policies. They are different because they are service contracts. Much like a service contract the covers repairs to your computer when it crashes, a home warranty is a company’s assurance to pay for repairs (and if necessary, replacement) of specific home components.
On the other hand, a home insurance policy (which is not always necessary) covers losses in case there is damage to your home and its contents or if they are lost because of theft, fire or other similar causes.
What is a Home Warranty?
A home warranty is a residential service contract that covers the cost of maintaining most major home appliances and system components for a set period which is usually one year. It takes care of the repairs and replacements of household systems and appliances that may happen due to failure, standard usage, and other problems because of their age.
When your appliance or home system breaks down, simply call your home warranty company. If your plan covers the breakdown, they will set up an appointment with a service technician in your area. The company pre-screens the service providers to make sure they have the license and qualifications to provide the necessary service. The service technician will take a look at the problem, make an assessment and review your coverage then tell you the next steps to repair or replace your appliance.
What Does a Home Warranty Cover?
Because there are many home warranty companies, you would also find many warranty plans that provide specific types of coverage. However, you will notice that they operate comparably and often use the same lengthy jargons and provisions in their service contracts.
Normally, you can get a warranty to cover kitchen appliances, heating and electrical system components, plumbing, water heater, sump pump, ceiling, and exhaust fans, garbage disposal unit, oven, washer and whirlpool tub.
There are some plans that let you buy optional add-on coverage for your spa, second refrigerator, pumps, swimming pool, and other installations.
What makes it different from a homeowner’s insurance policy is that a home warranty plan typically doesn’t require you to make a regular monthly payment. Instead, the company charges you a moderate service call fee (the going rate is around $100 or more) as necessary. Homeowners warranty coverage is entirely optional and your mortgage lender, insurer or anyone else will not require it.
What Do Home Warranty Plans Typically Exclude?
Much the same as other warranties or service contracts, home warranty plans carry some limitations on their coverage. Normally, home warranties exclude the modifications or changes that may be necessary when installing a piece of new equipment.
For example, if you’re replacing the HVAC, the contractor may need to do some structural or electrical modifications to give way to the new unit. Or perhaps you are installing a new water heater, but you need to replace or relocate the pipes coming in and out of the unit. Don’t expect the home warranty to cover these things.
How Much Does a Home Warranty Cost?
If you’re a home buyer, you know that your lender will require you to get homeowner’s insurance along with your mortgage but getting a home warranty is totally up to your discretion.
Basic coverage costs about $300 and goes up to about $600 if you want a more comprehensive plan, according to Shawna Bell of Landmark Home Warranty. Homeowners can add extras as they please when needed, such as coverage for a swimming pool or an external well.
Should You Need A Home Warranty Cover?
Homeowners can buy a home warranty at any point but often, they can get the best deals when they purchase the warranty at the same time they buy the home.
|Peace of mind||Exclude Certain Repairs|
|Cheap||Service call fees|
|Great incentive for buyers|
Benefits Of a Home Warranty
Undoubtedly, there’s a lot of advantages to getting a home warranty contract. It can save you money and put you at ease. You know that if you ever need major repairs in your home, someone will take care of it and a professional will handle nerve-wracking repairs for you.
Peace of mind
For some homeowners, being able to relax and not worry about repairs in the home is a priceless condition. This is probably the single most important benefit that a home warranty provides.
A clogged toilet or a broken air conditioner could cause stress to the family but not when you have a home warranty – the solution comes just by calling the warranty company’s hotline. Costly repairs would often disrupt the family budget and can even lead to financial hardships. But when you have a home warranty, these expenses become a non-issue because your warranty would often cover them.
Usually, when something breaks down in the home, the homeowner has to think and decide who to call to fix it.
When you have a home warranty, there’s just one party to call. Instead of spending time searching for someone who might be able to help you and canvassing for the cheapest price, you just need to call the warranty company. Tell them the problem and they will make the decision about who to send to take care of your situation.
There is actually a big potential to save lots of money with a home warranty on the most common repair jobs.
Consider this: home warranties cost between $350 to $600 but without a warranty, homeowners spend between 1% to 4% of the household budget on actual home repairs and maintenance every year. That’s about a minimum of $2,000 annually, a lot higher than the cost you pay for a home warranty.
A Great Incentive For Buyers
If you have plans of selling your home, a home warranty could add some value and make it more attractive to potential buyers.
You can emphasize that your home carries a home warranty. This means that if there were past repairs, only professionals did them on time and in a satisfactory way. It also means that the new homeowners will have the same coverage in case anything goes wrong. This will give them the same peace of mind that you have.
Cons of a Home Warranty
Excludes Certain Repairs
A home warranty is only as valuable as its coverage. It is totally meaningless for repairs or replacements that fall outside of the warranty. Some things may be within its standard coverage but there might be others in your home that may be outside the bounds of coverage. So, if it doesn’t cover the swimming pool pumps and you want to include them in the coverage, you have to shell out some extra cash for them.
Even if it covers a certain feature of your home, the company might deny your warranty claim if you are negligent in properly maintaining the feature. If you’re the new owner of a home with a 10-year old air conditioner that the last owner did not take care of, the warranty may not be of help when it breaks down.
If your home is a little older, you need to find out if the warranty company has set a limit on how much they will pay per incident. One more thing to check is information about code upgrades. If your water heater fails and you need to bring the system up to meet the new code standards, the cost could be huge. The home warranty limit may not be sufficient or the provisions may not even cover it at all.
While turning over the decision-making aspect of the repair to the warranty company frees you of some work, it also means having less say on how to do the repairs, who does them and what brands to use for replacement.
Service Call Fees
Yes, home warranties can cover a host of repair expenses but typically, they don’t cover 100% of them. Normally, every time an incident happens, you’ll have to pay a service call fee of about $50 or $75. If the repair needs more than one type of technician, you might have to pay that service call fee to each of them.
Is a Home Warranty Right For You?
Many experts suggest getting a home warranty coverage to protect yourself from potentially costly mechanical and system repairs that are outside the scope of your homeowner’s insurance. But you will find differing opinions that say warranty providers are too quick to exclude coverage for questionable reasons and subjective technicalities.
Others say that it’s hard to recoup the cost of investment in warranty policy. There are also horror stories of shoddy repairs by a provider the homeowners did not choose. Some service representatives also bully homeowners to accept repairs when the defective feature already needs a replacement.
Here’s how you can evaluate your needs: Compare the age of each item in the warranty with its expected average life span. Use the chart at the National Association of Certified Home Inspectors website. When the expensive components are near or past their estimated useful life, you might benefit a lot from a home warranty. However, warranty protection normally skips components that have pre-existing problems.