Anyone who owns or is thinking of owning a home is likely familiar with the concept of home warranties. They act in a manner similar to home insurance in that they cover major systems in the household. However, that is where the similarities end. A homeowners insurance policy kicks in when the home is exposed to a catastrophic event, such as a fire or tornado. In contrast, the home warranty covers the repair and replacement of major systems in the home.
What is a Home Warranty?
A home warranty functions as a policy that covers the cost of repairing major home appliances and systems. It serves as a contract between the homeowner and the warranty provider where the provider covers the cost and labor for the repair or replacement of major home systems like bathtubs or solar setting and appliances like thermostats or air conditioners. The systems and appliances covered vary by the plan selected and affect the cost of a home warranty. The warranty typically covers a one-year period, and the homeowner has the option of renewing the contract. Many areas require the contractor to provide a warranty that covers the home’s structural elements, but this warranty doesn’t last the life of the home.
The Cost of a Home Warranty
Homeowners often want to know how much they will pay for this protection. Several factors play a role in the cost, such as the systems covered. Nevertheless, a person can expect to pay a few hundred dollars each year for basic coverage. The cost increases if the individual chooses an enhanced warranty plan.
What is Covered?
Before purchasing a home warranty, the homeowner wants to know what items will be covered. They must read the plan they are interested in purchasing, as those plans vary by provider. However, the average plan covers mechanical items in the home while excluding non-mechanical ones like doors and windows. The plan covers normal wear and tear but doesn’t cover any damage caused by improper maintenance or negligence. Furthermore, it won’t cover repairs that are necessary as the result of improper installation.
Most plans today cover major appliances in the home, such as the HVAC and electrical systems. In addition, a homeowner may choose to obtain coverage for a septic system if their home is equipped with one. Appliances covered within the home include dishwashers, ceiling fans, garbage disposals, water heaters, and the oven and range. The plan may also cover inside plumbing stoppages, telephone wiring, and more.
Homeowners might find they must purchase additional coverage if they want their washer and dryer covered. Garage doors typically don’t fall under a home warranty plan and the same holds for pools. Certain things remain excluded from this type of policy. In most cases, this includes the refrigerator, garage door opener, spa, and faucets. The home warranty provider doesn’t cover permit fees or items that were broken prior to the contract being signed. Furthermore, any exclusions listed in the policy become the responsibility of the homeowner.
Why Purchase a Home Warranty?
Homeowners might wonder why they need a home warranty. Wouldn’t it be better to budget money each month to pay for repairs to these systems and appliances? What are the benefits associated with purchasing the warranty?
Lower Costs
Homeownership isn’t cheap, as people quickly discover once they move into a residence. Regardless of how much a person pays for their home, they spent a significant sum of money to call it their own. The purchase of the residence is only the beginning. They must then maintain the residence, make repairs when need, and replace home systems and appliances when they break. The warranty helps to keep these costs under control, even when multiple systems or appliances break down within a short period.
Individuals who purchase a warranty for their residence find they must pull money from savings less often to cover necessary repairs or replacement items. In addition, they know exactly who to call when something breaks in the home. Call the warranty provider and they send someone out to diagnose the problem and make the necessary repairs. The homeowner doesn’t have to do anything else in this situation if the appliance or system affected is included in their contract.
Time Savings
Men and women quickly realize one benefit of having a home warranty is they no longer need to worry about waiting around for someone to diagnose the problem and then choosing a company for the necessary repairs. The warranty company has a network of professionals to call on, which helps to ensure the job is done right in a timely manner. Homeowners appreciate the ease of having these repairs completed when they partner with a warranty company to have the work done.
Additional Coverage
Homeowners recognize their homeowner’s insurance doesn’t cover a number of situations. The home warranty fills in many gaps seen with traditional homeowners’ insurance. Many individuals discover they benefit greatly from having both types of coverage in place, as the insurance covers catastrophic situations while the warranty takes care of situations resulting from normal wear and tear. Homeowner’s insurance doesn’t prevent appliances and household systems from breaking or failing. They also don’t pay out when this happens. The home warranty combined with the insurance coverage ensures the highest level of comprehensive protection for the residence.
Less Waiting
Individuals find they don’t have to wait long for the coverage to go into effect when they purchase a home warranty. Certain policies come with no waiting period, while most providers have a waiting period of two weeks to one month. These policies don’t come with a home inspection requirement either, which homeowners appreciate. They don’t want to spend time having an inspector come out and examine the home from the front yard to the ending fence, as it adds another thing to their plate. The elimination of this requirement is greatly appreciated.
Simplified Budgeting
Creating and sticking to a budget becomes easier when a person purchases a home warranty for their residence. They no longer need to guess how much household repairs will cost. Depending on the provider selected, the homeowner may find they can make monthly premium payments, while some offer a quarterly, bi-annually, or yearly option. Compare this to the cost of a major repair.
Men and women often find they must either cover the cost of the repair up-front or borrow money to do so if they don’t have a warranty. Most providers today don’t offer a payment plan. They rely on a third-party provider for financing, and the homeowner becomes responsible for the interest on top of the cost of the repair or replacement. This interest can significantly add to the cost of the repair, which offsets the convenience of being able to pay for the repair over time.
Added Home Value
Individuals looking to purchase a home appreciate knowing a residence they are considering has a warranty in place. Thanks to this plan, the chances of them having to make repairs to the home or replace a major system are reduced. The warranty on the home for sale plays a role in the added home value, but it is something to consider when you are determining whether you wish to obtain this type of coverage.
What to Consider When Purchasing a Home Warranty
Home warranties come with several benefits. However, men and women need to recognize the plan is only as good as the coverage it provides. A homeowner should determine the age, condition, and expected lifespan of different systems and appliances in the home to determine whether to buy a warranty and which plan to purchase. The National Association of Certified Home Inspectors website serves as a good resource when gathering this information.
When comparing plans, look for the ones that cover costly components within the home. These systems and appliances need to be included in any policy that is purchased. Pre-existing issues come into play when making this decision, and the homeowner must understand any exclusions written into the policy. Furthermore, a homeowner must learn whether the company they are considering for their warranty provider has the proper licensing and registration. Review the contract carefully, including the fine print. Many homeowners assume all home warranty contracts contain the same information. This isn’t the case, and it falls on the individual to know what is in the contract they are signing.
Ask what is excluded from the policy. For instance, the company may not cover an appliance if the problem results from improper installation. Certain policies limit the amount of wear and tear the provider will cover, and homeowners need this information in advance. Certain policies cover the cost of repairs but not a replacement. Additionally, the policy may put a cap on the cost of repairs. Finally, learn who handles the repairs and how to cancel the plan if it is no longer needed for any reason.
Consider investing in a home warranty. Doing so helps to keep ownership costs under control. However, choose the right provider for the best results and carry out routine maintenance to ensure the protection remains in place. Doing so helps to ensure claims aren’t rejected. It also provides the maximum benefits of the policy, and the policy pays for itself.
