Dec 3, 2019

The Ultimate Home Warranty Guide

The Ultimate Home Warranty Guide

Why a home warranty?

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.

What is a home warranty?

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.

What does it cover?

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:

  1. In good condition during the beginning of the service period
  2. Located in a residential property
  3. Be specified in the policy
  4. Failure was caused by normal wear and tear – Home warranties usually do not cover things you’re supposed to take care of regular maintenance such as water filters, refrigerator filters, water dispensers, etc. or any damage caused by neglect.

Optional Coverage

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:

  • Swimming pool
  • Septic system
  • Well pumps
  • Spa
  • Extra refrigerators
  • Built-in wine coolers
  • Washer and dryer components

Exclusions

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.

What is the difference between a home warranty and home insurance? 

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.

Why do you need a home warranty?

Expensive appliances and home system breakdowns are bound to happen. Here are three benefits of having a home warranty:

  1. Save money – One of the major selling points of home warranties is that it is significantly less expensive than the cost of replacing or repairing your home’s most important components. For a fixed annual price and by adding only a small service call fee, you are covered. A warranty can also be helpful for people who have just depleted their savings to buy a home and want to avoid any additional major expenses.
  2. Save time and energy – Requesting a service with a home warranty provider is a straightforward process. You simply login online or call a toll-free customer service number, then the company will dispatch a technician to your home. With most policy’s straightforward service request that’s available 24 hours a day, 365 days a year, you can get help faster with them than you can independently.
  3. Work with an established network of background-checked technicians – Home warranty companies like Fixd Repair have their own network of licensed technicians, so you won’t have to worry about tracking down professional contractors who are background-checked, industry-certified and fully insured.

How do you file a claim?

The process of filing a claim also vary but it usually operates in the following order:

  1. You call the home warranty company or go online to their website anytime a covered item fails
  2. Once the home warranty company receives your request, they will arrange for a local service technician to call you to arrange for an appointment to check the broken item
  3. At the time of appointment, you will pay a service call fee, a fee you incur each time a claim is made and for each mechanical malfunction repaired. Most service call fees range from $50 – $125.

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.

Purchasing Coverage

How much do home warranties cost?

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.

How to purchase: Choosing your home warranty service provider

  1. Do your research. Nowadays it’s easy to lookup sample contracts from home warranty companies online. Aside from searching for the contract, there are also crucial questions you could ask during your research:
    • Which home warranty company is tried and true in your area?
    • Who are their technicians? – How soon can the technician get to you if you have an emergency fix?
    • Will buying a home warranty require a home inspection or maintenance record?
  2. Look at reviews. Make sure that the home warranty company has positive ratings and reviews online. It also helps to take note of negative reviews. If the company responds with a solution, it means they have good customer service.
  3. Read the policy and its fine print. Even though poring over fine print sounds boring and tedious, it’s important to make sure you understand the policy’s parameters on what is covered and what is excluded. This will save you from massive financial headaches later.
  4. Be smart when asking for quotes. So you’ve asked a home warranty company for a general quote from and you’ve received a five-page document with a generic price. How do you know that this quote is a good quote? Look deeper at your particular situation. Does your home have unique features or high-risk items? Since not all quotes are created equal, make sure the details are there that fit your preference and unique setting.

Benefits and Drawbacks of a Home Warranty

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.