A home warranty is a valuable tool for homeowners. It provides peace of mind by protecting against unexpected, costly repairs of home appliances and systems if they break down or malfunction.
But if you’re new to the concept of home warranties, you probably have a lot of questions—like what exactly do they cover, do you really need one, and what is the difference between a home warranty and homeowners insurance? We’ll cover all of that and more in this comprehensive guide—so you can decide if a home warranty makes sense for you.
What is a Home Warranty?
A home warranty is an annual service contract that helps cover the repair and replacement of important household appliances and home system components if they stop working due to age or normal wear and tear.
Types of Coverage Available
Home warranties typically cover major systems like heating, electrical, air conditioning and plumbing; and appliances like dishwashers, ovens, washers, dryers, refrigerators, microwaves, garbage disposals, water heaters, garage door openers and more. Some companies also offer additional coverage for things like well pumps, pools and spas.
Most providers offer a few different plans with varying levels of coverage. Many also offer “a la carte” coverage for items not included in their out-of-the-box plans for an additional fee. Of course, the more expansive the coverage, the higher the price point, so it’s important to understand exactly what you need.
Home Warranty vs. Homeowners Insurance
Home warranties are not the same as homeowner’s insurance. Homeowner’s insurance covers damage and loss caused by outside forces like fire, weather, natural disasters, theft and vandalism, while a home warranty covers repairs of systems and appliances that break down or malfunction due to normal wear and tear.
How Does a Home Warranty Work?
Home warranties are designed to help ease the financial burden associated with expensive repairs or replacements of major household appliances or systems. Here’s how it works:
1. File a claim: If a home appliance or system malfunctions and you have a home warranty service contract, you can file a claim to have it fixed or replaced. You’ll pay a service fee (also called a deductible) each time you file a claim. This varies by provider but typically ranges from $50 to $150. If repairs are needed that are not covered by the warranty, you will need to pay for them out-of-pocket.
2. Schedule an appointment: Your warranty provider will connect you with a third party service provider within their approved network, so you can set up a service appointment at a time that works for you. Some companies will also give you the option of choosing your own contractor.
3. Repair or replacement: The service provider will come to your home to identify the issue and either make the repairs or help replace the item if that’s what’s required. The warranty company will cover the cost of the parts and labor or new item as detailed in your contract.
Repairs Covered
Home warranty providers cover repairs to systems and appliances that malfunction or break down due to normal wear and tear. They typically do not cover damages due to external forces like weather, natural disasters, fire, theft, vandalism or misuse.
Coverage varies widely from provider to provider, but most companies offer coverage for heating and air conditioning systems, plumbing, electrical systems, water heaters, refrigerators, dishwashers, ovens, washers, dryers and garage door openers.
Coverage Considerations
Many home warranty providers offer a few different plans, with varying degrees of coverage and price points. So, in addition to selecting a provider, you’ll also need to choose a plan that meets your needs. Be mindful that some plans may provide coverage for plumbing items and stoppages, others may not.
Similarly, some will cover wear and tear on pools, spas and well pumps, others do not. Many companies offer optional coverage for items like these, which you can add to your plan for an additional fee.
This brings up another important consideration—cost. The ultimate goal is to find a provider and plan that offers the coverage you need at a price that fits within your budget. When choosing a home warranty provider, it’s important that you read the terms and conditions carefully so you understand what is and isn’t covered under each policy.
Keep in mind that customizing your plan can increase the price you’ll pay, and that if you have more than one of a certain appliance, you may need to request additional coverage since many standard warranties cover just one of each eligible appliance.
Benefits of a Home Warranty
There are many reasons a home warranty is a valuable investment for homeowners, including:
Peace of mind: Perhaps the greatest benefit of a home warranty is the peace of mind it brings to homeowners, who can rest easy knowing that if a covered system or appliance stops working, they’re not on their own to figure out what to do next.
With home warranties, you don’t have to worry about finding a trustworthy repairman or getting a surprise bill for an astronomical amount of money. Your provider will connect you with a vetted professional contractor who will handle your repairs quickly and thoroughly. The company will also ensure that you only pay the deductible outlined in your service contract.
Financial protection: A home warranty is a great way to protect you from paying for costly repairs or replacements when something in your home malfunctions or breaks down. There are also fewer unanticipated costs—you’ll know what your premium costs and you’ll know what your deductible is for any repairs covered under the warranty, so you’ll never be caught off guard by a service bill.
Convenience: Most home warranties are convenient and easy to navigate. When something needs repair or replacement, all you have to do is contact the warranty company and they’ll take it from there, sparing you the headache of finding a qualified and reliable service provider.
Choosing the Right Home Warranty
Here are some tips to help you choose the best home warranty for your house:
Identify your needs: There’s no sense in paying for coverage for home appliances and systems you don’t have. Start by compiling a list of your coverage needs, which you can refer to as you start shopping. Consider including any major home systems or appliances that are older or that would cost you significantly if they were to stop working.
Compare coverage: No two home warranty providers or plans are the same, so finding the best option for you will require some research. Be sure to review the terms and conditions of any plan you’re considering to determine the types of items covered, the extent of the coverage, as well as any restrictions that may apply. If you need items covered that are outside the scope of most standard plans, you’ll want to ensure that the company offers optional coverage add-ons for those.
Compare pricing: The price of a home warranty depends on a few factors, including the provider and plan you select. Carefully review the terms and conditions for any policy you’re considering to determine if there are any added fees, and be sure to inquire about the cost of coverage add-ons. Look for discounts or promotions that may reduce your premium or deductible.
Read reviews: Reading reviews and testimonials from other customers can give you a sense of how reliable a particular provider is when it comes to honoring claims, and how accessible and helpful the company’s customer service is. The Better Business Bureau is also a great resource for consumers looking for information on a business’ reputation.
Using this criteria, you can evaluate a top home warranty provider and determine which best suits your needs.
Maximizing Your Home Warranty
To maximize the benefits of your home warranty, there are a few important steps you can take.
First, it is essential to understand the terms and conditions of your policy. Make sure you know what is covered and what isn’t, as well as any limitations or exclusions that may apply. This will help you make informed decisions about when to file a claim and when to seek other solutions.
Second, regular maintenance and upkeep are key to getting the most out of your home appliances and systems. Regularly checking on the condition of these items can help you identify potential problems before they become more serious (and more expensive) issues that may be outside the scope of your home warranty plan.
Following manufacturer instructions for proper use and care of these items can also help extend their lifespan and ensure that when they do break down, it’s due to normal wear and tear and will therefore be covered by your plan.
Conclusion
A home warranty can provide peace of mind and financial protection for homeowners who appreciate knowing that when a home appliance or system breaks down, they’ll get immediate assistance—without the sticker shock. Because home warranty plans vary widely from provider to provider, it’s important to review the coverage terms prior to selecting yours.
Additionally, by taking care of your appliances and systems with regular maintenance checks and proper use, you can extend their lifespan and ensure that when they do break down, the repairs are covered by your plan.
