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Purchasing a Home Warranty

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. A home warranty is a service contract that covers the costs to repair or replace your house’s major systems and appliances.

While a home insurance policy protects your home in scenarios such as fire or flood damage, it won’t come in handy when your refrigerator or washing machine dies — and unfortunately, a part of homeownership is dealing with broken appliances. Without a home warranty, these repairs could cost you hundreds or even thousands of dollars.

However, if you have a home warranty, you simply need to make a claim and your warranty provider will take care of the rest. 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.

architectural shingled roof

What Does a Home Warranty Cover?

A home warranty doesn’t cover everything in your home, and therefore it is important to understand the types of warranty coverage plans.

  • 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. 

It’s 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. There might also 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 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.

Home Warranty Companies

There are countless home warranty companies on the market to choose from, and it’s wise to speak with multiple to understand their plans, coverages, costs and how well they meet your needs. 

Here are some of the top-ranking home warranty companies for 2020:

Amazon Home Warranty

  • Pros
    • Can select own service technician
    • Robust selection of coverage add-ons
    • No charge caps on most appliances and high charge limit on HVAC
  • Cons
    • Many exclusions and a $500 charge limit for roof coverage
    • No coverage for commercial-grade appliances or systems
    • Only one service fee option
  • Cost
    • Service fee: $75
    • Base premium: $52/month

AFC Home Club

  • Pros
    • Can select own service technician
    • Low cost and service fees compared to competitors
    • Wide-range of plans and add-ons
    • Up to three-year work guarantee
  • Cons
    • Limited roof leak option
    • Limited HVAC service coverage
    • Slower turnaround time
  • Cost
    • Service fee: $75–$125
    • Base premium: $50/month

Choice Home Warranty

  • Pros
    • 90-day repair guarantee
    • Multiple customer services representatives on each claim
    • Optional roof leak coverage with no charge limit on repair
  • Cons
    • All covered items have exceptions
    • Not available in every state
  • Cost
    • Service fee: $85
    • Base premium: $50/month

American Home Shield

  • Pros
    • Build-your-plan warranty plans
    • Low-cost options
    • Comprehensive coverage with robust add-ons
  • Cons
    • Low annual limits on some applications and systems
    • Need approval to use your own technician
    • Limited coverage for roof damage or leaks
  • Cost
    • Service fee: $75–$125
    • Base premium: $40/month

First American

  • Pros
    • 24/7 repairs available
    • Unlimited service calls allowed
    • Custom plan options
  • Cons
    • Limited roof leak coverage
    • Not available in over one dozen states
  • Cost
    • Service fee: $75–$100
    • Base premium: $45.50/month

Questions to Ask Your Home Warranty Company

After comparing the costs and coverage limitations of a home warranty company, there are a few other questions every homeowner should ask.

  • 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.

Is a Home Warranty Worth It?

Whether a home warranty is a sound investment depends on numerous factors discussed in this article, including the age of your home and appliances, how long you plan to live in the home, and if a coverage plan fits into your budget

Having a home warranty has the potential to save homeowners money in the long-term when appliances and home systems need replacement. 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.

For most, a warranty can provide a financial buffer and peace of mind for the inevitable repairs that come with homeownership. Still, it’s wise to determine your needs, inventory the status of your home’s appliances and systems, and connect with different warranty companies in order to understand if a home warranty is the best choice for your home’s situation.

Next Steps

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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Homeowner Resources

Here are the top articles that homeowners found useful when finding a home warranty company and navigating the process.

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