A home warranty can save homeowners high out-of-pocket expenses on appliances and systems that are covered. A home warranty can also provide peace of mind, especially for new homeowners. Keep reading to learn more about what a home warranty covers.
What is Covered?
If you are wondering what your home warranty covers, read the contract carefully. Each home warranty company is slightly different in what they cover. Typically, home warranty coverage includes all of the essential appliances and systems that homeowners use regularly.
Some providers have different plans from which homeowners can choose. For example, some have coverage just for the appliances in a house, such as a refrigerator or a dishwasher. Other plans only protect the house systems, such as the air conditioning and electrical system. Still other plans cover both systems and appliances under one warranty.
The most commonly covered appliances include the refrigerator, dishwasher, microwave, washer, dryer, oven, and cooktop. Many also cover garage door openers and trash compactors. Air conditioning, heating, electrical, plumbing, water heater, smoke detectors, and central vacuums are the systems that are usually covered.
Some providers also provide additional coverage as add-ons to a policy. Examples are pools, septic systems, well pumps, and spa equipment. Always check a contract carefully to ensure that it includes the necessary items before signing.
What Isn’t Covered?
Home warranties do not cover all repairs. Pre-existing conditions are not be covered. Items damaged by improper installation or maintenance will not be covered. If items are misused or have damage other than normal wear and tear, they probably won’t be covered. Check contracts for specific exclusions. Some providers also have maximum payouts for appliances and systems. When the replacement reaches that limit, homeowners must pay any remaining amount.
Home Warranties vs. Homeowner’s Insurance
Home warranties are different than homeowner’s insurance. A home warranty covers specific appliances and home systems inside the home for issues due to normal wear and tear. Homeowner’s insurance, on the other hand, covers property inside and outside of a home that is damaged due to a natural disaster, such as fire, hail, wind, or theft. Mortgage companies require homes to have homeowner’s insurance but not home warranties.
How Does it Work?
When a covered appliance or home system breaks down, the homeowner calls the home warranty provider, who calls a contractor out to the house. Homeowners are responsible for paying a one-time service fee, usually ranging from $75 to $125. The warranty company will pay the remainder of the service call. The annual cost for plans typically ranges from $400 to $600, depending on how comprehensive it is.
Is a Home Warranty Worth the Money?
Home warranties are an easy way to protect homeowners from paying high out-of-pocket expenses for breakdowns of systems and appliances. Home warranties can give peace of mind, especially for first-time home buyers, those selling a home, or homeowners who feel that they need more protection on their home systems or appliances. There are, however, risks involved. Homeowners may spend more for the premium than they will for repairs during the year. Homeowners also do not get to choose which contractors come to fix the problem. This can be a drawback for some people.
If you are thinking about purchasing a home warranty, read the contracts carefully. Peace of mind and lower expenses during the year will likely be the reward.