When a person purchases a house, they may be offered a home warranty as part of the deal. New homeowners are also often contacted by companies that sell home warranties. Home warranties have benefits for many homeowners, but home warranties are not always needed. It is important to know when home warranties are helpful and when to pass on them.
What is a Home Warranty?
Anyone considering a home warranty should get advice from their Realtor and other experts to see if it will be a benefit in their situation. There are different home warranty plans available from 2-10 HBW and other companies selling this form of homeowner protection. The homeowner pays a monthly fee and then, when they call for a repair, they pay a small service fee.
By definition, a home warranty is a service agreement in the form of a yearly contract that will cover the cost of repairs or replacements for specified home systems and appliances. Systems and appliances break down with normal use over time and can be very expensive to replace. A home warranty is a way to protect a family from large unexpected repair or replacement costs for covered items in the home.
How Does a Home Warranty Work?
Home warranty companies have relationships with a network of independent contractors who give them special pricing for appliance and system repairs or replacements. This saves the warranty company money while covering their customers’ repairs.
When a system or appliance breaks down, the homeowner contacts the home warranty representative for service. This representative contacts the appropriate service provider who goes to the home to diagnose the problem and reports back to the warranty company. The warranty company decides if the problem is covered. If the problem is covered, the contractor gets the approval to repair the problem for the agreed-upon service fee.
Not every home appliance or system problem is covered by this service agreement. It is important for the homeowner to read the home warranty agreement carefully before signing up for it. A list of systems and appliances that are covered should be included, as should a list of limitations. It is the homeowner’s responsibility to check the home warranty before calling for service.
What Are the Advantages Of a Home Warranty?
A home warranty has several important advantages, including having peace of mind where appliances and home systems are concerned. If those covered systems or appliances break down, there will be a small service charge rather than a large repair or replacement bill. For many homeowners, the monthly fee is worth avoiding big repair bills.
A home warranty helps homeowners budget for possible appliance repair costs and keep those costs down. When a home has aging appliances, home warranties can keep unexpected repair costs down. Home warranties pay for appliance problems that home insurance will not cover.
Do You Need Both Home Owner’s Insurance and a Home Warranty?
Homeowner’s insurance and a home warranty cover different things and different types of damages and losses. It may be an advantage to have both to be more fully covered for home emergencies and losses.
Home owner’s insurance is intended to protect the home structure and belongings from unexpected events, such as fire, storm damage, theft, or vandalism. It is mandatory to carry homeowner’s insurance as long as their is a mortgage on the home.
A home warranty is voluntary and is meant to cover repairs and replacement of home systems and appliances due to normal wear and tear and aging. Home warranties do not cover what homeowner’s insurance covers.
What Systems and Appliances Are Covered?
Most home warranties cover all or part of these appliances.
- Refrigerators
- Clothes washers and dryers
- Ovens, stoves, and ranges
- Dishwashers
- Built-in microwaves
- Garage door openers
- Trash compactors
Home warranties can cover these home systems:
- Air conditioning and heating systems
- Electrical systems
- Plumbing systems
- Water heaters
- Garbage disposals
- Smoke detectors
The homeowner chooses basic coverage to all-inclusive coverage with differences in monthly fees. The homeowner should make a list of appliances and systems they want to be covered and present that to the home warranty company representative to get the correct home warranty plan for their needs. If the available plans do not cover everything a homeowner wants covered, they can have appliances or systems added to the plan at an additional cost.
What is Not Covered?
Home warranties won’t cover the appliances or systems when they involve the following.
- Appliances with pre-existing conditions at the time the home warranty takes effect
- Damage caused because of improper installation or lack of maintenance
- Cosmetic issues like dents and scratches
- Damage caused by the misuse of an appliance or system or using them for something besides residential use
In addition to these limitations, there will be maximum payouts listed on the home warranty. Damages caused by disasters or events covered by homeowner’s insurance won’t be covered by the home warranty. This makes it very important to read the home warranty carefully.
Deciding If a Home Warranty Is Needed
When deciding whether to purchase a home warranty, consider these things:
- Newly built homes have their own builder’s and new appliance warranties
- Whether the home will be undergoing renovations and appliance replacements
- If the home just purchased has had recent renovations and appliance replacements with warranties
- The homeowner is capable and willing to do most of their own appliance repairs
Under the above conditions, a home warranty might not be needed or beneficial. However, if the following conditions apply, a home warranty should be considered.
- The home purchased is older with aging appliances
- The new homeowner is not capable or does not want to be responsible for appliance and system repairs
- The homeowner wants to have a budget for repairs and avoid expensive surprises
- The homeowner has a demanding job and can not take the time to arrange for appliance or system repairs and needs the convenience of a home warranty.
- The Realtor or home seller offers a home warranty as part of the closing package when purchasing a home.
Each homeowner has to weigh the cost of a home warranty against the advantages it offers in their individual situation to decide. Home warranties are for one year with the chance to renew for additional years. A new homeowner might want to have a home warranty for the first year and then decide if it should be renewed.
