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What is a Home Warranty and is it Worth the Cost?
Being a homeowner means dealing with the unexpected. You never know when your plumbing system will back up or your washing machine will go on the fritz or that old water heater that came with the house will finally call it quits. And because appliance repairs can get expensive—fast—it’s important to protect yourself. That’s where a home warranty comes in.
What is a home warranty?
A home warranty is an insurance policy that will cover the cost of repairing or replacing your appliances if they break down from normal wear or tear.
Essentially, a home warranty is peace of mind for homeowners. Appliances aren’t cheap to buy or repair, and it helps to know that you have a policy in your pocket that will cover you in the event of unanticipated appliance problems.
Keep in mind that a home warranty won’t cover any unusual wear or tear, or appliances that break down due to improper installation or improper maintenance. It’s up to you as the homeowner to cover costs related to repairs or replacements because of human error. But there are still plenty of situations where a home warranty will be a lifesaver (or at least a cash-saver).
What does a home warranty cover?
Home warranties cover appliances. Coverage specifics vary by plan and by state, but what you’ll generally find included are:
- Heating and cooling systems
- Electrical systems
- Plumbing systems
- Washing machines and dryers
- Kitchen appliances such as your refrigerator, dishwasher, garbage disposal, oven, and range
- Water heaters
- Duct work
- Telephone wiring systems
Many home warranty companies will give you various options so you can customize your plan depending on what you need and how much you want to pay. So if you need something extra on top of the basics, such as coverage for your outdoor swimming pool, discuss that with the warranty providers you’re considering and see what they can offer you.
When you’re researching plans, be sure to get a clear idea of what each policy covers. If you’ve just purchased a home with an older kitchen, for example, you’ll definitely want to double check that your kitchen appliances will be taken care of under the warranty (kitchen appliance coverage is pretty standard, but you’ll still want to verify). You should also look into what the plan does not cover so you don’t get an unwelcome surprise when something breaks and you find out it doesn’t qualify.
What isn’t covered by a home warranty?
While it is possible to add coverage for specific items that aren’t covered under a standard policy (provided your home warranty company allows for it), if you’re just going with a basic warranty there are a number of things you should not expect to be covered if they break down. These include:
- Garages and garage door openers
- Outdoor items such as pools, spas, and sprinkler systems
- Non-plumbing related roof problems
- Septic systems
- Secondary AC or heating systems
Also excluded are “pre-existing conditions”—items that were broken or damaged prior to closing and which you were informed about during your home inspection. In those scenarios, your best bet is to ask the seller to repair or replace the item as part of your pre-closing negotiations.
If you’re concerned about any of the exclusions, it never hurts to ask your policy provider if there are options to include coverage for those with your plan. Do know however that any coverage above and beyond your standard policy will incur added fees.
What’s the difference between a home warranty and home insurance?
There’s a simple distinction between the two: a home warranty covers appliances broken due to wear and tear while home insurance covers your home’s structure and your belongings in the event of a damaging event such as a fire, flood, or burglary.
The two key differences between a home warranty and home insurance are what they cover (appliances vs. structure and belongings) and when. With a home warranty, you don’t need to experience a damaging event to incur coverage—just basic use is sufficient.
When should you buy a home warranty?
Many homeowners purchase a home warranty as soon as they move in to their new house, especially if the home is a bit older. And often, home buyers ask sellers to include a home warranty with the sale. But you don’t need to have or buy a warranty right when you move in—you can purchase a home warranty at any time, whether it’s a few weeks after closing or a few years.
How much does a home warranty cost?
The average price for a home warranty comes in at just over $600 a year, but they can vary widely by your state, the age of your home, the amount of coverage you choose, and your term details. Policy terms are generally one year, with the fee paid in one lump sum. You may be able to get a deal if you buy your home warranty at the same time as you buy your house, and you can also try to take advantage of any specials or promotions that are being offered throughout the year.
How does the home warranty work?
If you’ve purchased a home warranty and you want to make a claim, first check your policy’s documentation to make sure the item in question will be covered. If it is, call your home warranty company directly and let them know the situation. Home warranty companies work with various service providers, and one will get in touch with you to schedule an appointment.
Even though you pay a yearly fee for your warranty, there is still a cost to having a service provider come out to take a look at and repair your appliance—usually about $100. If the provider is not able to repair the appliance, your home warranty company will cover the cost of a replacement appliance, including installation.
If you’re not happy with the outcome of your service—for example, if your claim was denied or if you are not satisfied with the replacement appliance—you are always free to make an appeal. Home warranty companies, like all insurance companies, have some flexibility in the way that they deal with claims. If you think there’s been a mistake or that you weren’t provided with the level of service you expected, it’s worth speaking up about it.
Do you need a home warranty?
There’s no hard and fast rule that all homeowners need to buy a home warranty. It’s really up to you and the amount of risk that you want to take on. If you’ve just moved into a new construction home or the appliances in your home were recently updated, you can probably get away with waiting a while before making your warranty purchase. On the other hand, if you’ve moved into an older home or a home with outdated appliances, it might be a good idea to make sure you’re covered. Remember: it’s perfectly reasonable to ask the seller to include a home warranty as part of the purchase agreement.
If you’re the type of person who appreciates the benefits of a little peace of mind, then purchasing a home warranty is probably a good idea for you. This may mean that you buy a policy right when you close on your new home or that you wait a couple of years and buy a policy after your appliances have gotten some wear. Whichever way you choose to go, research multiple policies to find the best fit for both your budget and your expected needs.