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Learn the Ins and Outs of Home Warranties

If you’ve purchased a house or have been looking for one, you may have encountered the term “home warranty.” What is home warranty? Is it different from home insurance? What does it cover? What are the benefits? These questions would be answered here.

What is home warranty?

Home warranty provides coverage for the major systems and appliances of your home that have failed or broke down from normal wear and tear. It’s an option for homeowners that can bring peace of mind whenever a system or an appliance breaks or malfunctions, making sure that these items are in always in a safe and working condition. Systems and appliances have limited lifespans, and a home warranty can help ease the cost of paying for a repair or a brand new replacement.

With home warranty, you don’t need to look for a good plumber, repairman or electrician – the home warranty company will do it for you. They will be the one who will call a service technician you need. Once a suitable technician is found, the technician will call you and make an appointment, and will arrive at your home for diagnosis. He/she will collect a small service call fee from you. The technician will call your home warranty company and get authorization for repair or replacement to make sure it is covered in the contract. Once authorized by the company, the technician can start repairing the problem. If the system or appliance cannot be repaired, the home warranty company will pay to replace and install the system or appliance with similar features. One of the conditions of a home warranty plan is that a homeowner must maintain their appliance and home systems.

If a house isn’t covered with a home warranty yet, an owner can purchase it anytime for any house, whether it’s a brand new property or a house you’ve been living in for 30 years.

Usually, a home warranty is included in a house involved in a real estate transaction. If the house is not involved in any real estate transaction and has been owned for more than 30 days, a homeowner who would purchase a home warranty may have to wait for 30 days for coverage to begin.

The cost of a home warranty plan may range between $300 to $600 a year, depending on the type of home, size of home, place of residence and desired level of protection. It’s best to list the systems and appliances that you want to be covered first before you avail a home warranty plan. Work with a customer service representative and go through your needs and wants to check if the company can provide and to find the plan that’s best for your home.

Is home warranty different from home insurance?

One of the biggest misconceptions about home warranty is that it’s the same as home insurance. But no, they are not the same. Home insurance covers the house itself – its structure and the possessions inside from fires, floods, theft or damage of other causes. Home insurance is mandatory by law. Basically, it covers things that might happen.

Meanwhile, a home warranty covers the systems and appliances that are within the house. Home insurance won’t be able to claim if your dishwasher started leaking or if your electrical system fails, but home warranty can. It’s optional, which helps homeowners with repair and replacement costs. It covers things that will most likely happen over due to wear and tear, like when water leaks, toilet overflows and HVAC stops running.

What does home warranty cover?

All home warranties vary. It depends on the warranty plans availed by the customer, the contract, and the additional special coverage the homeowner may ask. Companies have different plan offerings, and more expensive plans mean more coverage. However, most basic home warranties cover these items:

  • Plumbing systems
  • Electrical systems
  • Heating systems
  • Cooling systems
  • Appliances like oven, dishwasher, built-in microwave, range or cooktop
  • Kitchen exhaust fan
  • Garbage disposal
  • Ceiling fans
  • Garage door opener
  • Plumbing stoppage
  • Whirlpool bathtub

Depending on the level of coverage plan, warranties may also cover:

  • Washer and dryer sets
  • Refrigerators
  • Water softeners
  • Ice makers

Additional systems and coverage may include:

  • Septic systems and septic tank pumping
  • Central vacuum system
  • Swimming pools, spas and hot tubs
  • Grinder pumps
  • Roof leak repair
  • Well pump
  • Sump pump
  • Stand-alone freezer or second refrigerator

You can tailor your home warranty plan to include coverage for items that matter to you most. Different parts of these systems can be covered while some may be excluded, depending on the plan. When purchasing a plan, read the contract thoroughly to avoid conflicts in the future. Keep in mind that a home warranty generally covers the mechanical parts of a system or appliance – those that affects their main functions. For instance, a broken oven door handle is not be covered because it doesn’t affect how the oven cooks food; but if a heating element is broken, it is included in the home warranty.

What are the benefits of a home warranty?

Besides being able to get a contractor or technician for you, a home warranty has a lot of benefits. First of all, it can save you a lot of money. For instance, for an AC unit that has 15-year life expectancy, getting a home warranty may cost you only at least $450 to get it replaced, compared to spending $4,000 to $6,000 if you do it without home warranty. If home warranty is bought for homes with older systems and appliances, it gives more savings in case of malfunctions.

Having a home warranty is also beneficial for homeowners who don’t have the expertise, time, or access to emergency funds in case they have to handle unexpected home repairs. It also helps homeowners who plan to sell their home, as houses covered by a home warranty plan sell faster for more money than a house without warranty coverage.

What are the exclusions of a home warranty contract?

Every home warranty offerings have different types of exclusions. Most home warranty premiums are low simply because they can’t cover every single repair. Some home warranties put limit to certain items where they will pay up for a specific amount or replacement and the homeowner should pay for the rest. Some would cover anything on the contract up to a certain amount, and then will no longer pay for repairs of replacements once the amount has been fully used up.

For a home warranty company to cover your repair, you must maintain the system and appliances in your home. Covered systems and items must fail due to wear and tear, and must be in a good working condition on the time of signing the contract. If you don’t maintain your systems and appliances, they won’t be covered by a home warranty in case they fail.

Home warranties may also not cover known conditions. A home warranty won’t cover something that is already found to be in a bad condition. What is and isn’t covered by the warranty is in the contract, so it’s very important to take time to read through it, so you won’t be caught unaware.