Home warranties are a relatively new protection for homeowners. This warranty protects homeowners from unexpected bills for broken appliances or home systems. An appliance breaking down can mean a repair bill in the hundreds or a replacement cost in the thousands. But home warranties even out the cost and help homeowners avoid super expensive repair and replacement costs for the items in their home covered by the home warranty.
What Is a Home Warranty?
A home warranty is a contract between a homeowner and the warranty provider that guarantees repair or replacement of the covered systems and appliances in a home should they break down. The home warranty coverage includes the repair or replacement of major appliances and systems that break down because of normal wear and tear because of everyday operation.
This is different from home insurance which protects the home structure and belongings from loss due to severe weather, flooding, fire, theft, or vandalism. The two insurances serve different purposes and do not overlap. The homeowner should purchase them both to be fully covered.
The home warranty is an agreement between the homeowner and the warranty provider that comes with an annual or monthly fee and a fee for each instance of appliance or system repair or replacement. The warranty company usually has preferred contractors to do the work. They will also have specific suppliers to purchase replacement appliances from.
It is important to read the home warranty contract and ask for changes in coverage to meet the homeowner’s needs. Home owner’s warranties have limitations and exclusions the homeowner must be aware of.
What Does a Home Warranty Cover?
A home warranty normally covers home systems such as whole-house air conditioning, water heaters, plumbing, electrical, and heating. Appliances such as stoves, ovens, refrigerators, dishwashers, garage door openers, washers, and dryers are typically covered. If the homeowner wants other appliances or home systems covered, they may need to add them to the contract for an additional charge. Read the contract carefully because it will only cover those systems and appliances listed on the contract. There are exclusions and homeowner requirements to follow.
How much does the Typical Home Warranty Cost?
A home warranty cost will vary from company to company and depending on additional items added to the coverage. But, typical monthly premiums run from $28.00 to $60.00. The fee charged per repair usually runs from $60.00 to $125.00. These repair fees are a lot less than the contractors normally charge. If you add additional items to the warranty contract the cost will go up.
How to Buy a Home Warranty
There are a few steps every homeowner should take when purchasing home warranties to get the best coverage.
1. Decide what the needs are for this home warranty. Are the appliances older but in good running order? Do some appliances have active manufacturer’s warranties on them? What condition are the home’s major systems in? The value of a home warranty depends on the likelihood of appliances or systems breaking down. Make a list of systems and appliances you want to be covered and compare that list to the standard home warranty contract each company offers.
2. Contact several local, reputable home warranty companies and compare their coverage vs cost. Asking your real estate company for recommendations is a good way to find reliable warranty companies. Ask around to other homeowners who may have home warranties to get their recommendations. Add up the charges and compare them and also compare these costs to the likelihood of appliances breaking down. If the cost of the warranty coverage is more than the probable repair costs, look at other bids.
3. Read each home warranty contract carefully, especially the fine print. Ask questions to be sure what is covered and the conditions under which it is covered. The contract might have exclusions or terms and conditions that will make the coverage lower and harder to claim.
What is Not Covered Under Home Warranties?
Every home warranty has limitations on what they cover and the conditions they require for coverage. Exclusions often include these things:
1. Appliances with pre-existing conditions or failed before the home warranties’ effective date.
2. If the home systems such as plumbing, electric, or heating are not up to code, they will not be covered.
3. Appliances that have been altered or improperly installed will not be covered.
4. Home warranties do not have scratch and dent coverage so minor physical and appearance defects won’t be covered.
5. Appliances or systems that have been neglected or not maintained properly will not be covered.
6. Appliances that have been misused or abused will not be covered.
7. Most home warranties have a 30 day or more time period from signing the contract until you can make the first repair claim.
8. Appliances that are not specifically listed on the home warranty will not be covered.
9. Appliances and systems that are new enough to be covered by manufacturer warranties will not be covered.
10. appliances and home systems that are damaged by events that would be covered by home insurance will not be covered. In other words, if appliances are damaged by a fire, flooding, vandalism, theft, or severe weather events, they will not be covered.
This is why it is essential to carefully read the warranty contract before signing it and before making a claim. The warranty company’s repair contractor will come out at each claim and make the determination of whether the appliance repair is covered under the contract. The homeowner and the warranty company may not agree on the decision made.
Is a Home warranty right for You?
If a family is purchasing a newly built home, the contractor will provide a warranty for the construction and materials in the home and the manufactures of the appliances and systems will provide manufacturer’s warranties. In this case, it is not necessary to purchase a home warranty right away.
If a family is purchasing an older home, the owner or the realtor may offer to provide a homeowner’s warranty with the sale. In this case, the buyer is getting a free home warranty and should definitely take it. It is also acceptable to ask for a home warranty when purchasing an existing home. But, if the home warranty is not provided, the home buyer should purchase a home warranty for at least the first year when they are not familiar with the appliances and their condition.
When purchasing an existing home it is always a good idea to have a home inspection and use that as a basis for deciding whether to purchase a home warranty. This is a case where you are guessing which appliances may break down and comparing that cost to the cost of a home warranty.
First-time homebuyers who are not familiar with appliance repairs and home maintenance would be wise to purchase a home warranty to protect them from large repair bills and looking for repair services. Homeowners or buyers who have busy schedules might benefit from a home warranty since they can save time and the effort of finding home appliance repair services. If something breaks down, they can get it fixed with one call to the home warranty company. People with health problems and limited mobility will benefit from having a home warranty also.
But if the homebuyer is planning extensive remodeling and appliance replacement soon after purchasing a home, a home warranty will not be worth the investment. Any new appliances will be covered by the manufacturer’s warranties. If the appliances in a home being purchased are relatively new and in good condition or still under manufacturer’s warranties, a home warranty may not offer enough benefits.
Homebuyers on small budgets or who want to know what they will need to budget for appliance repairs in advance might be good candidates for home warranties. The home warranty has fixed costs and limits appliance repair costs to a small fee with each repair.
Homeowners who are skilled at DIY appliance repairs will not benefit from a home warranty. If they are confident that they can manage most repairs themselves, they may opt to save the money a home warranty would cost them.
Each homeowner must balance the cost of a home warranty with the likelihood of appliances breaking down and needing expensive repairs. If a homeowner pays the $500.00 to $700.00 per year and nothing breaks down, they may consider the money wasted. On the other hand, if they did not purchase a home warranty and the furnace breaks down and repairs cost $1,000 or more or the furnace must be replaced for even more money, they would have been far ahead to have a home warranty. A refrigerator or a stove can cost hundreds to repair and thousands to replace.
It is well worth looking into home warranties when purchasing an existing home. Most warranty companies will send a representative out to examine the appliances and determine which ones the company will include. At this point, they will determine if the appliances have been adequately maintained or have existing defects. Their decision on which appliances to cover will help the homeowner decide if the warranty will cover enough appliances and systems to be worth purchasing.
To get the best coverage, the homeowner must read and understand all the conditions of their home warranty.