In basic terms, a home warranty is a service contract that covers the costs to repair or replace your house’s major systems and appliances. Buying a home is one of the largest investments most people will make, and purchasing a home warranty is a common strategy to protect that investment.
While a home insurance policy protects your home in scenarios such as fire or flood damage, it will not come in handy when your refrigerator or washing machine dies — and unfortunately, a part of home-ownership is dealing with broken appliances. Without a home warranty, these repairs could cost you hundreds or even thousands of dollars.
However, if you do have a home warranty, you simply need to make a claim and your warranty provider will take care of the rest. For instance, if a home’s oven or ductwork has an issue, a home warranty prevents a homeowner from paying a large sum of money out-of-pocket for repairs. Sounds great, right? It can be, but much like other forms of warranties, they aren’t for everyone.
The pros at Modernize are here to help you understand the ins-and-outs of the home warranty process, what to expect from different plans, costs and fees, and if a plan is worth it for you.
What Does a Home Warranty Cover?
A home warranty doesn’t cover everything in your home, but plans can encompass a lot. It is important to understand the types of warranty coverage plans. In its broadest terms, home warranties usually cover:
Systems plans: These will cover major, whole-house systems such as HVAC, plumbing, electrical systems, etc.
Appliance plans: As its name suggests, these plans cover your home appliances like the oven, refrigerator, dishwasher and more.
Combination plans: These are larger plans that combine the coverage of both systems and appliances.
Some companies will also allow homeowners to build custom plans and purchase add-on protection for miscellaneous items such as a pool or second refrigerator.
Here’s a general overview of items that are and aren’t typically covered by a home warranty. It is important to check when reviewing a home warranty package to see if it covers systems, appliances or both, especially items that are important to you.
Do home warranties typically cover this?
Laundry washer and dryer
Room A/C window unit
Some items that do not fall under average home warranty packages include garage doors and their tracks, windows, walls and doors, sprinkler systems, window A/C units, alarm systems and their wiring and ornamental fountains.
Additionally, there are types of damage to a home that a warranty won’t cover including pre-existing conditions, issues caused by insufficient maintenance, damage from accidents and more.
It is important to thoroughly read the terms and conditions of any warranty plan and understand their limitations. For example, a plan that covers your refrigerator might not offer protection for the ice maker. Additionally, while an HVAC system is typically covered by a home warranty plan, window air-conditioning units are not. There might be exemptions for appliances/systems that break under certain situations — an oven that breaks during a self-clean cycle might not be covered, as an example.
Additionally, appliances or systems might have to meet certain regular maintenance requirements or be installed properly by a professional to be eligible for coverage.
How Much Does a Home Warranty Cost?
The typical home warranty package will cost between $300 – $800 annually. While most home warranty companies will charge $600 or less annually in base fees, there are some additional costs to budget for. For instance, additional or customized coverage can add $100 or more to your yearly premium. Additionally, each time you file a claim, you will likely have to pay a service fee depending on the provider. Learn more about the costs involved with a home warranty.
How Does a Home Warranty Work?
Imagine coming home after a long day of work and upon reaching into the refrigerator you realize everything is warm. What do you do?
With a home warranty, you’ll simply contact your warranty provider and file a claim on the issue. The company will then connect you with a trusted service provider to assess the problem (typically within 48 hours) and either repair or replace the appliance or system. Depending on how complicated the repair or replacement process is, this part of the process can take anywhere from a few hours to a few days.
Again, understanding the terms of your plan is important as the warranty provider might have caps on how much they will cover, or offer depreciated values on replacements. Additionally, most companies have a service fee or deductible the homeowner must pay on each repair.
Do I Need a Home Warranty?
Having extra protections on your home is typically a great way to maximize your investment, but it doesn’t mean a home warranty is right for everyone. Every homeowner’s situation is unique, and they should consider several factors when deciding if a home warranty is their best option.
How old is your home? If your home is new, the appliances and systems are likely still protected under a manufacturer’s or builder’s warranty, some of which offer years of coverage. But, if your home — or the appliances/systems in it — is older, then a home warranty might be a good option.
Are you a first-time home buyer? Buying a home is a stressful process, especially if you’ve never done it before. Many first-time buyers see value in purchasing a home warranty during closing to prevent headaches later.
Are you planning to sell your home? You might be wondering why you’d purchase a warranty plan if you’re looking to sell, but this added coverage can protect the hard work you put in before bringing the house to market. Plus, warranty plans can often be transferred to the new homeowners and entice potential buyers.
Can you afford a home warranty? We’ll get into home warranty costs in a little bit, but just know that if you have some wiggle room in your budget, a home warranty might be an excellent way to avoid future financial stress.
Is a home inspection necessary? Some companies require a home inspection or maintenance records before a warranty can be purchased.
Will there be a charge for repeat visits? If a problem persists, like an A/C that won’t stop leaking, will you be charged a service fee for each visit?
What is the termination policy? Typically, a home warranty is a year-long contract, but many companies will allow you to cancel at any time. Ask your potential provider if they charge termination fees and how much they are, if applicable.
What are the coverage limits? As discussed earlier, warranty providers will typically place coverage caps on services. It’s good to have an understanding of what these caps are.
Choosing the Best Home Warranty Company
With so many home warranty companies and plans available to homeowners today, it can be difficult to find the one that best suits your needs. How do you know if a home warranty company is reputable and trustworthy?
We recommend starting by comparing companies’ offerings. Look into their costs, including both monthly premiums and service request fees, plan coverage inclusions, coverage limitations and exclusions, response times, and service areas. Which of these factors are most important to you? Then, once you have prioritized what you want in a home warranty company, speak to 3 to 4 representatives on the phone to get a better feel for their customer service.
Whether a home warranty is a sound investment depends on numerous factors. Of course, home warranties aren’t a good fit for every homeowner. Important questions to ask yourself when considering a plan include if this is your first home, how old the home is, if you plan on selling in the future and how much of a financial safety net you have.
Consider the limitations
Like other types of warranties, there are coverage limits. Compare the cost of the warranty to the cost of the appliance(s) being covered in order to determine whether the policy is worth it to you or not.
Peace of mind
For most, a home warranty can provide a financial buffer and peace of mind for the inevitable repairs that come with homeownership.
When dealing with appliance repairs, remember that out-of-pocket costs can rack up quickly, costing hundreds or even thousands of dollars in some instances. A home warranty safeguards this process. You simply make a claim and let your warranty provider deal with the bulk of it.
This is why for many, a home warranty is well worth the less than $1,000 annual cost. The policies and their ability to be customized are effective for long-term savings, preventing homeowners from having to dip into savings every time an appliance breaks down. However, other strategies might be more effective depending on your unique situation — such as setting aside about 1% of your home’s value each year for repairs.
Like any investment, it’s important to consider the pros and cons of a home warranty with a professional. That’s where Modernize comes in.
After telling Modernize more about your needs and expectations, we can quickly connect you with a trusted home warranty provider in your area. This informative guide can provide you the knowledge and understanding you’ll need to select a home warranty company to protect your home and investment.
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