Home warranties provide financial protection in case appliances or systems break down. However, they can be expensive if you don’t shop around for the best deal.
Some people consider home warranties a smart investment, especially if the items in their homes have been used for years and are nearing their life expectancy. Others think it’s better to save money and use an emergency fund instead. Knowing the difference between home warranty vs homeowners insurance can provide needed knowledge on everything you need to know about a warranty.
Home warranties cost a monthly premium to cover repair or replacement of appliances and systems that homeowners insurance doesn’t include or where the expense would exceed the policy’s deductible. However, it’s difficult to compare plans based on price alone because costs vary by company and plan, as well as by state.
When researching providers, look for a company with low premiums and generous coverage caps. Those who have add-ons that allow customers to customize their plans can offer more flexible options. Look for additional benefits like a dedicated rainy-day fund or priority repairs.
Home warranty companies typically have a network of prescreened service technicians in your area. Many provide online reviews from local customers that can help you evaluate a company’s reputation and reliability. Also consider the service fee, which is a per-service call charge that covers the cost of a technician’s visit to your home. It usually ranges from $75 to $125. It’s also common for service fees to increase with plans that cover more systems or appliances.
Coverage
A home warranty offers a level of peace of mind for homeowners, and it may also benefit sellers who want to offer the protection as an incentive to buyers. But before signing up for one, check to make sure that you’re getting what you pay for. Look beyond the yearly premium to find out what the contract covers, and how much the company might charge for copays, service calls or other costs.
The National Home Service Contract Association notes that most contracts don’t cover routine maintenance, and they usually exclude damage caused by lack of maintenance or by improper installation or modification. Also, they generally don’t cover preexisting conditions.
Look carefully at a home warranty company’s website, especially its customer testimonials and BBB rating. You might also ask the company for sample contracts to review. They won’t fully reflect the final contract, but they will give you an idea of what to expect. You should also read state laws on home warranties.
Exclusions
Most products come with warranties that protect consumers against unexpected problems, and home appliances are no exception. However, just like all service contracts, these agreements can contain fine print that could leave homeowners surprised when it comes time to file a claim. For example, most home warranty providers exclude items that are covered by another warranty or insurance policy. Also, they usually do not cover repairs that result from primary issues or damage caused by a DIY repair attempt. This is why frequent maintenance and meticulous record-keeping are so important for homeowners.
Additionally, many providers set coverage limits on systems and appliances that determine the maximum amount they will pay to diagnose, repair or replace them. This information can be found by asking a representative or reviewing a contract sample. When a company reaches these limits, they will generally provide a cash payout to the homeowner instead of fixing the item. This is an important detail to understand before deciding to purchase a plan.
Repairs
Home warranties cover repairs to appliances and systems that fail due to age and normal wear and tear. This includes kitchen and laundry appliances, heating and cooling systems and electrical systems. However, home warranties do not cover cosmetic issues such as dents in dishwasher front panels or scratched refrigerator doors.
If an appliance or system breaks down, you simply contact the home warranty company and they send a technician to your house to diagnose the issue. They will then schedule a repair professional to fix the problem. You pay a service fee to the company, which is typically less than the cost of paying for a contractor out-of pocket.
When choosing a home warranty provider, it’s important to read reviews and compare plans. Find out whether companies have coverage caps and if their claim approval process is clear. Also, make sure to read a sample contract before signing up. The contract should outline the services provided, a list of covered items and the dollar limit per repair or per year.
