What is a Home Warranty, How It Works, and What It Covers
A home warranty is a contractual agreement that provides for the repair or replacement of a home's systems and appliances. Unlike homeowners insurance, which covers the home's structure and contents from damage, a home warranty does not cover items like home furnishings. Although electronics and other specific items are typically not covered under a standard home warranty, many companies offer additional coverage options through riders for almost any home system or appliance.
A home warranty typically requires an annual fee and service fees charged when a claim is made. When a homeowner files a claim, service contractors are dispatched to address the issue. Typically, covered items are repaired or replaced within 48-72 hours, according to the service contract terms
Home warranties generally cover essential home appliances such as refrigerators, washing machines, dryers, dishwashers, microwave ovens, and stoves. They also extend to crucial home systems like HVAC, plumbing, water heaters, and electrical systems. Many policies also allow homeowners to add coverage for items like swimming pools, hot tubs, and outdoor appliances.
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How to Choose a Home Warranty Company
Buying a home is a significant investment, and protecting that investment is crucial. One way to do this is by purchasing a home warranty plan. Here’s a guide to help you understand what to look for when choosing the right plan for your needs.
Home warranty cost
When evaluating the cost of a home warranty plan, consider the premiums, service fees, deductibles, and potential additional costs. Compare plans for the best value. Watch for price increases upon renewal and the costs of optional add-ons. Balancing these factors ensures you get the right coverage for your budget.
Coverage Details
When evaluating a home warranty plan, ensure it covers essential systems and appliances. Choice covers more than 25 major systems. Check for exclusions and coverage limits, and consider optional add-ons. Understand maintenance requirements and replacement terms. Review service fees and claim processes for a comprehensive understanding of the plan.
Customer Service
Ensure the provider offers 24/7 customer support for emergencies, as timely assistance is vital during unexpected breakdowns. Check response times for service requests; faster responses mean quicker repairs. Consider the provider's reputation. Good customer service can significantly impact your overall satisfaction.
Coverage Limits and Caps
These limits specify the maximum amount the warranty will pay for repairs or replacements per item or annually. For instance, a plan might cover up to $1,500 per HVAC repair or a total of $10,000 annually. Exceeding these caps means you'll pay out-of-pocket. Check if the limits are reasonable for your home’s needs. Additionally, understand any aggregate limits, which cap the total payout for all claims combined.
Claims Process
Check how to file a claim—whether online, via an app, or by phone. Ensure the process is straightforward and user-friendly. Look into the typical approval time; faster approval means quicker repairs. Verify if the provider has a network of pre-approved contractors or if you can choose your own. Read reviews to see how efficiently claims are handled and resolved.
Contract Terms
Check the contract length; most are annual, but some offer multi-year options. Understand the renewal terms, including any potential rate increases. Examine the cancellation policy, noting any fees or conditions for early termination. Look for specifics on coverage start dates, as some plans have a waiting period. Ensure clarity on the process for modifying coverage during the contract term.
Choosing the right home warranty plan involves careful consideration of coverage, costs, provider reputation, and contract terms. By doing thorough research and understanding your specific needs, you can find a plan that offers peace of mind and protection for your home investment.
What are common home repair costs without a warranty?
We know having a home warranty plan can save a homeowner a lot of cash in the right circumstances. Homes age and so do big and small appliances and other items within the home. Without a good home warranty plan, you will likely be paying for repairs and replacements into the hundreds and thousands. Here are some of the most common repairs and their associated costs, with labor and materials combined^
COMMON REPAIRS | COST |
---|---|
Leaky Faucet repairs average cost | $150-$350 |
Roof repairs average cost | $1200 |
Water heater repairs average | $600 |
HVAC issues | $215 - $1,200+ |
Electrical issues | $250 - $1,000+ |
Septic issues average cost | $1,775 |
Dishwasher repairs average cost | $250 |
Home Warranty vs. Homeowners Insurance
Unlike homeowners insurance, which covers unexpected disasters or accidents, a home warranty deals with predictable issues, like normal wear and tear. The coverage you select can safeguard crucial home systems like HVAC and plumbing, your frequently used appliances, or both. Additionally, you often have the option to include your costly electronics in the policy.
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Bottom Line
A home warranty can offer peace of mind by financially protecting the systems and appliances in your home. However, the offerings can differ significantly from one company to another, making it crucial to compare options. Review various plans and additional benefits from different providers. Select a few companies and reach out for quotes to find a coverage plan that suits your needs.
FAQ
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Is a home warranty worth it?
A home warranty may be worth it if you are looking for financial protection against the costs of repairing or replacing major systems and appliances in your home due to normal wear and tear. It's especially valuable for those who might not have immediate funds available for unexpected repairs.
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What is a service call fee?
A service call fee, also known as a trade call fee, is the amount you pay each time a service technician visits your home to assess and repair a problem covered by your home warranty. This fee is typically required for each separate service visit.
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Is a home warranty required?
No, purchasing a home warranty is not required by law. It is an optional service contract that provides additional coverage for home appliances and systems, offering peace of mind and potential savings on repair costs.
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Are home warranty companies regulated?
Yes, home warranty companies are subject to regulation, but the level and type of regulation vary by state. It's important to check with your state's insurance commissioner or consumer protection office to understand the regulations applicable to home warranty companies in your area.
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Is a home warranty tax deductible?
Generally, a home warranty is not tax deductible for personal homes. However, if you own rental properties, the cost of a home warranty for those properties can potentially be deducted as a business expense.
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What are the cons of a home warranty?
The downsides of a home warranty can include the cost of the plan, service fees, limitations on coverage, potential for claim denials based on provider's assessment of pre-existing conditions or improper maintenance, and the choice of repair technicians being limited to those approved by the warranty provider.