Every homeowner worries about the expense if a major home repair is needed. Purchasing a home warranty can cover major appliances, HVAC systems, plumbing and electrical systems, and more. With this type of warranty, a homeowner, Realtor, or builder can avoid major expenses resulting from home emergencies. Home insurance is for disasters such as fire, severe weather damage, or vandalism and does not cover breakdowns due to normal circumstances. A homeowner may choose to have both kinds of coverage.
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What is a Home Warranty?
Home warranties are not the same as home insurance. They serve a different purpose. A home warranty is a service contract for a home that covers fixing or replacing covered home components and appliances. These warranties often cover things such as plumbing, electrical, HVAC, kitchen appliances, water heaters, ceiling and exhaust fans, and sump pumps. They may cover other items as listed. A Home Warranty Company will offer the homeowner different levels of coverage for different amounts of money.
The home warranty company may offer policies for different purposes such as for real estate agents, for builders, and for homeowners.
- Home warranties for homeowners protect them from appliance and system breakdowns in a home.
- Real Estate Home warranties protect the home from breakdowns while the home is on the market and while a sale is pending. Some Realtors give buyers a year’s home warranty as a closing gift.
- Home warranties for builders have coverage for structural defects, distribution systems, and workmanship.
It is important to read the home warranty before you sign up for it to make sure it covers the items you need to be covered. Understand the coverage and its limitations. Check to see if any appliances are excluded from the coverage. Know what your responsibilities for coverage are.
How Does a Home Warranty Work?
The homeowner pays a yearly fee for the home warranty. The fee or annual premium can range from a few hundred dollars to as much as $1,000 depending on the coverage and options. The annual premium might depend on things like the size of the house and the age of the appliances and systems. When something breaks down, the homeowner will call the company for coverage. The property owner will pay a deductible of from $50 to $125 and then the company will send out a service to make the repairs. They may also replace appliances when needed.
How well a home warranty works depends on the warranty company. Make sure the company issuing the home warranty has a good service record and happy customers. Know the limitations and rules for coverage in the warranty in advance. For instance, most warranties will not cover items that have not been maintained properly.
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Who Buys Home Warranties?
Home warranties are beneficial to homeowners who want to have a dependable budget for home upkeep. The home warranty takes care of unexpected breakdowns and appliance replacements within a known range of cost. Homeowners who want the peace of mind of professionals coming to fix broken appliances and those who are not handy at fixing things themselves benefit.
Older or physically challenged homeowners should consider a home warranty. First-time homeowners and new home buyers who are not familiar with how the home’s systems work will benefit from a good home warranty. People who are busy with careers and do not want to be bothered with home and appliance repairs might find having a home warranty an advantage because, if something covered goes wrong, it only takes a call to get it fixed.
Home warranties work well for a lot of people and not so well for others. But, when a family is buying a previously owned home with used appliances and systems, a home warranty might be a good idea. There is no way of knowing the wear and tear those appliances have been through and what condition they are really in.
Problems with Home Warranties
Some people run into problems with home warranties because they expect more from the warranty than it will deliver. It is important to carefully read and ask questions about the home warranty before purchasing it so the expectations match the warranty. Be aware of these reasons’ repairs are not covered in some plans.
- The homeowner did not properly maintain the appliance. It might be a good idea to have all the appliances and systems in a newly purchased home inspected and maintenance done shortly after moving into a home. Then there is a receipt for the work to show the warranty company. Ask the repair person for a list of maintenance requirements for each appliance and system.
- The appliance could have been installed improperly causing it to malfunction. That appliance inspection could remedy this.
- The warranty company could decide the appliance was too old or had too much use. This is a problem that should have been addressed at the time the warranty was purchased. The homeowner should find out the age of appliances and systems and give the warranty company the list and ask for clarification on which appliances will be covered.
Satisfaction with home warranties comes down to the dependability of the company, the communication before purchasing the home warranty, and realistic homeowner expectations. It also depends on the homeowner maintaining their home and appliances in accordance with the home warranty requirements.
Home Warranty Limitations
It is important to read the rules and limitations of home warranties carefully so there are no bad surprises. Some home warranties have limitations and exclusions on coverage the homeowner should be aware of. Appliances or systems that already have problems when the home warranty is signed may not be covered under a pre-existing damage exclusion.
- A homeowner might want a covered appliance replaced but the warranty company will insist on repairing anything that can be repaired.
- The warranty company might require the homeowner to use their specified service suppliers. They may have contracts with certain service companies to cut costs.
- With newer appliances, there may be a warranty in force that will cover the repairs without a co-pay. It is up to the homeowner to know this information.
Knowing whether to purchase a home warranty is the responsibility of the homeowner. Each homeowner should do a simple cost vs. benefit analysis to decide if they will come out ahead buying a home warranty. Once the home warranty is purchased, it is important to follow the listed requirements to ensure coverage when things go wrong.