A home warranty is a great way to protect your home, and your budget, but what exactly is it? These plans aren’t necessary for everyone, so let’s look at the details and you can decide if this is a beneficial option for your situation.
What is a Home Warranty?
A home warranty is a service contract that covers the cost to repair or replace various home systems. This means that if an appliance in your home breaks due to normal wear and tear, you are not entirely responsible for the cost of the repair. There are a variety of coverage options available, but most cover major home systems, including appliances, electrical components and plumbing.
The terms and conditions of your warranty provide the dates of your coverage, and any excluded home systems and appliances. For example, your home warranty may not cover a pool, but you may have the option to purchase additional coverage.
Home Warranty vs Home Insurance
Many people confuse home warranties with homeowners insurance. While there are some similarities between the two, a home warranty doesn’t eliminate the need for home insurance.
Your home warranty covers damage due to everyday wear and tear. For example, if your washing machine quit working, you’d submit a home warranty claim. On the other hand, if a tree limb fell on your home and damaged the roof or siding, you’d contact your home insurer regarding coverage for the damage.
An easy way to differentiate between the two is homeowners insurance is required, while a home warranty is not. However, both forms of coverage are ultimately designed to protect your home. With that, having both forms of coverage can provide peace of mind, and provide cost savings in the event of unexpected repairs being needed.
Home Warranty Coverage
- Heating and cooling systems, including the water heater
- Basic home systems including electrical systems and plumbing
- Appliances from the washer and dryer to the oven, dishwasher and refrigerator
- Minor kitchen appliances such as the garbage disposal, range, and built-in microwave
How Does It Work?
Home warranty companies offer coverage for single family homes, condos, and a variety of other residences. The coverage period is typically one year, with the option to renew coverage at the end of that year.
It’s common for home buyers to purchase a home warranty when closing on their new home. Oftentimes this is the best opportunity to score a deal. Some homebuyers even negotiate this purchase into the purchase contract at the sellers expense. However, homeowners can purchase coverage at any time throughout the year, regardless of how long they’ve owned the home.
When you choose to purchase a home warranty, you either pay an annual fee or make a monthly payment. This payment provides peace of mind that you won’t be facing uncertainty if any surprise repairs pop up.
It’s important to note that home warranties do not cover pre-existing conditions and often require paying a deductible if something does break. Ultimately, your coverage is more cost effective than paying to replace large home systems entirely out of pocket.
Submitting a Claim
Home protection plans provide buyers with directions for filing a claim to request a repair. Coverage typically begins 30 days after purchase. Then, if an appliance or system in your home quits working, you can review your coverage to confirm the repairs will be covered. Claims can be filed online or over the phone.
When filing your claim or shortly after, you typically have to pay a service fee or trade call fee. Think of this as a co-pay for the repair services being provided. Once the claim is approved, and a service request is made, the warranty company provides an approved, in-network repair technician to access the situation within 48 hours.
In some cases the technician can make a repair immediately, other times a part will need to be ordered and a follow up appointment made. It’s important to note that in some cases, the warranty may not cover the entire replacement cost of major appliances. However, to avoid any surprises this should be detailed in your contract.
Home Warranty Cost
Home warranty cost varies based on the size of your home, what type of residence it is and the systems covered. Typically, a basic warranty can cost between $350 and $650 per year. Some companies charge buyers a monthly fee while others charge one rate annually. Other plans itemize coverage by appliance. For example, your A/C unit may be covered up to $1,000.
In addition to purchasing the home warranty, most plans charge a fee for each service call. These fees vary, typically based on your plan type, and can run between $60 and $130. Some companies have a set fee for every appliance, and it can be as $3,500 per appliance.
Ultimately, each plan is a little different and you should review your options carefully before making a purchase.
Limitations to Consider
A home warranty provides the peace of mind that if something breaks, the repair is likely covered. However, this coverage does come with some limitations.
The home warranty company chooses the service provider. If your A/C stops working, your first instinct might be to call your local heating and cooling company, but under a home warranty this is typically not allowed. However, if you’re looking for an option that takes the work of finding a service provider off your hands, a home warranty is a great option.
Your appliances may be under warranty already through the manufacturer or your builder. Most new appliances come with a manufacturer’s warranty that lasts up to five years in some cases. This coverage depends on the cause of the breakdown and type of repair required. Buyers of recently built homes should review the builders contract to see if a warranty period is included. Typically a builders warranty can include plumbing, electrical and some other systems.
You can opt for equipment breakdown coverage over a home warranty. Your home insurance policy may offer this for an additional monthly or annual fee, which could ultimately save you more money.
Is a Home Warranty Right for You?
Your home warranty could provide peace of mind in knowing you’ll have assistance if any surprise repairs come up. However, this peace of mind comes with a cost and if you live in a relatively new home or have new appliances, you may already be covered by other warranties at no additional cost.
Ultimately, when considering a home warranty, be sure to do your research and read the fine print. Most companies provide a few levels of coverage, be sure to choose the right one for your home and your budget. Consider consulting a trusted real estate agent regarding coverage options they recommend.
Trelora works with hundreds of clients each year, so our agents have seen a variety of coverage options and can advise which may be right for you. When you buy your home with Trelora, we split our commission with you 50/50, up to $6,000 cash back. That money could cover your home warranty or even go towards purchasing new appliances.