A home warranty protects your budget from the financial risks of maintaining a home. Yet, most homeowners find warranties confusing. How does it work? What’s the difference between a home warranty and home insurance? How do you justify the cost?
If you find answers to these questions, home warranties can give you peace of mind for your investment–your home. As an added benefit, home warranties can save you from paying out of pocket for inevitable appliances and home system breakdowns by covering repair or replacement costs. You can take advantage of home warranties to save you frustration, money, and time.
This article answers the basic questions you might face before purchasing a home warranty. It walks you through the entire process of understanding home warranties, as well as learning about pricing, coverage, exclusions and filing claims. By reading this, you should be able to know everything you need to ask yourself and your provider to get the most out of your policy.
A home warranty is one that provides for repair or replacement cost in almost any malfunctioning appliance or home system during a predetermined time period. It appeals to those who want a financial safety net for expensive, unforeseen repairs, especially older appliances. However, the key to home warranty satisfaction is knowing exactly what is and isn’t covered by the policy. Once you’ve chosen a company with excellent, transparent policies and customer service, you’ll enjoy the assurance and benefits of owning one.
Policies vary by provider but generally, a home warranty covers home systems and appliances that fail due to normal wear and tear. In general, items should be:
A home warranty should cover the basics but depending on your policy, you might want additional buyer protection option for certain features unique to your home, including but not limited to things such as:
Homeowners usually make the mistake of believing that home warranties cover everything. Any premium, ultra-premium, double-wall ovens, combination overs (like oven/microwaves) and commercial brands are not usually covered or will have a liability cap.
A “liability cap” is an annual dollar limit on how much the provider will pay for a particular replacement or repair. The dollar cap for major appliances and systems should be $500 or more.
While insurance and warranties are two kinds of protection for your home, they have a distinct difference. Home insurance typically covers fire, smoke, vandalism, burglary, and damage caused by natural disasters. On the other hand, home warranties protect your budget on the items you use the most, such as the furnace, heater, appliances, etc. Think of home warranties more like service contracts instead of insurance where you pay to keep an appliance or home system running. If the home warranty company doesn’t get the item to run, they’ll replace it.
Expensive appliances and home system breakdowns are bound to happen. Here are three benefits of having a home warranty:
The process of filing a claim also vary but it usually operates in the following order:
Most home warranty companies do not reimburse for out-of-pocket expenses, so do not do DIY repairs or call any contractor of your choosing.
On average, most home warranties cost about $350 to $700 per year. The price depends on property types such as condominium, duplex, townhouse, etc. You can either purchase a home warranty for a specific contract term, generally a year or two. Service contracts may be renewed or cancelled at any time.
Most home warranty companies will allow you to cancel the contract at any time but you need to contact them to verify. Cancellations fees generally cost around $50 to $75.
Overall, home warranties come with both benefits and drawbacks. Owning one saves you time and frustration by giving easy access to a network of background-checked technicians by just going online or giving a quick call. Another great feature is that warranties can save you money, offering a flat rate fee when a home system or appliance breaks down. You’ll have peace of mind knowing that you’re covered without spending hundreds of thousands for repairs.
On the other hand, home warranties have downsides too. Not everything is covered, so you have to pore over the contract and make sure that you find a plan that suits your situation best. If your home has unique features, you might have to buy additional buyer protection, driving up the total cost. Warranties also have industry-standard dollar caps which means that you might still have to pay out-of-pocket for certain repairs.
The best scenario for choosing your home warranty company is when it functions like a partner that will help you manage the process of fixing home breakdowns in a correct and efficient manner. It’s important to read reviews, double-check the contract and deep-dive into research to find a fairly priced policy that covers the specific needs of your home.