Understanding Home Warranty Coverage
A home warranty can save you money on expensive household repairs. It can provide protection if something goes wrong with your home’s major systems or appliances. Common features of home purchase agreements, a home warranty can offer peace of mind for both sellers and buyers. A home warranty is also handy as your home ages and manufacturer warranties begin to expire.
But what exactly is a home warranty, how does it work, and do you need one? Here, we break down the ins and outs of home warranties, including what they cover, exclusions, extra coverage, and restrictions.
Types of Home Warranty Plans
Most home warranty providers offer two to three types of warranty plans:
- Appliance-Only Plans: These plans typically cover several kitchen and laundry appliances.
- Systems-Only Plans: HVAC, electrical, and plumbing systems are commonly included in these plans.
- Combination Plans: This offering combines coverage for appliances and systems under a single plan.
What Does a Home Warranty Cover?
While different home warranty companies offer different coverage packages and pricing, most include protection for home systems and appliances. Unlike insurance plans that cover the structure and personal property from events and damage, warranty plans offer protection for mechanical system and appliance defects and wear and tear.
Here are the types of items commonly covered by a home warranty plan. Keep in mind specific equipment and parts may vary by warranty provider, so review each company’s agreement for a list of what is covered:
- HVAC Systems: Central AC condenser, wall unit, ductwork, furnace, geothermal units
- Electrical Systems: Wiring, outlets, electrical panel, circuit breakers, fuses, built-in exhaust fans
- Plumbing Systems: Leaks, line clogs, toilet, clearing of bathtubs, showers, and sinks, drain, waste lines
- Water Heaters: Units up to a specific size (50 gallons, 75 gallons, etc.)
- Kitchen Appliances: Refrigerator, oven/range, dishwasher, built-in microwave, garbage disposal
- Laundry Appliances: Washers and dryers
- Access Control: Garage door openers and hard-wired doorbells
Optional Coverage in Home Warranty Plans
In addition to home systems and standard appliances, most warranty companies offer optional coverage on various features. Optional coverage is considered an add-on and comes with additional annual fees and coverage details determined when you purchase your policy:
- Pools and spas or hot tubs
- Septic systems
- Sump pumps
- Roof leak repairs
- Central vacuums
- Light fixtures
- Well pumps
- Additional refrigerators
- Stand-alone freezers
Common Exclusions in Home Warranty Coverage
Most home warranty providers exclude several features and conditions in their plans to keep costs affordable. Prevent unwelcome surprises and avoid paying service fees by familiarizing yourself with these common home warranty exclusions:
- HVAC: Radiant heat, humidifiers, de-humidifiers
- Plumbing: Water filtration or purification systems, saunas, steam rooms or showers, water softeners, stoppages from root infiltration
- Systems and appliances with pre-existing malfunctions and problems
- Improper maintenance or neglect
- Cosmetic defects like dents and scratches
- Structural components including walls, windows, and doors
- Items still covered under the manufacturer’s warranty
How the Warranty Claim Process Works
Submit a claim with your warranty provider by phone or on its website and pay the service fee indicated in your contract. Service fees vary by company, with $75 to $150 as the average cost.
After you pay the service fee, the company selects a local service technician from its network of screened contractors and specialists. The technician will call you directly to schedule an appointment. Upon arrival, the technician will verify that the service request is a covered item and will complete the repair.
Home Warranty Restrictions and Limitations
In addition to the exclusions mentioned above, there are a few other restrictions that typically come with a home warranty plan.
Coverage and Payout Maximums
When reviewing the contract, pay attention to the amount of money a provider will pay for the warranty term and for each repair type. Each plan’s payout limits differ by provide. Average maximum payout ranges from $10,000 to $50,000 for the warranty term (12 to 24 months), and $500 to $5,000 for each covered item.
Proper Maintenance
Warranty coverage is often contingent upon proper and regular maintenance of home systems and appliances. Some warranty providers include contract clauses that exclude repairs resulting from improper care, use, and maintenance.
Pre-Existing Conditions
The age of your home’s systems and appliances will not preclude coverage from most providers, but their condition might. For example, a home warranty company will typically cover an HVAC system that is 20 years old, but it will not pay a claim for an issue caused by a lack of maintenance.
Waiting Periods
It is also important to know if your plan includes a waiting period before coverage begins and you can submit a claim. This will also vary among providers, and 30 days is common. Waiting periods prevent claim payouts from pre-existing issues and help keep plan costs affordable for everyone.
Transferability
Many home warranties are transferable in a home sale. This means your home’s plan will transfer to the new homeowner in the event you sell your home.
How to Choose the Right Home Warranty Plan
Selecting the right home warranty coverage for your home is a matter of evaluating the age and condition of your HVAC, electrical, plumbing, and appliances. For example, if you recently remodeled your kitchen, your new appliances are covered by manufacturer warranties so a home systems-only plan may be the right choice for you. If you are planning to purchase a resale home, a combination plan that covers both systems and appliances can save you money on expensive repairs after moving in.
Pay attention to not only the annual cost for the plan but to service fee costs, which can add up quickly if you end up needing many repairs. Coverage details vary by provider, so review their lists of covered and excluded features, as well as coverage and plan payout maximums.
Finally, read customer reviews for each warranty company you are considering. Here is a short list of issues to watch for:
- Ease of submitting a claim
- Denied claims
- Technician lead times for appointments
- Repairs requiring more than one visit
Start your home warranty research by reviewing Modernize’s compilation of the 10 best warranty providers.
Benefits of Having a Home Warranty
- Cost Savings: A warranty can help with the financial burden of expensive repairs to a home’s mechanical systems and appliances. Repairs to an HVAC system can easily run $1,000 or more, so having some extra protection can be a real benefit.
- Peace of Mind: A home warranty also provides peace of mind when purchasing a resale or new home. In the case of a resale home where the condition of systems and appliances is unknown, a home warranty can save you money if things start breaking down the first few months after moving in.
- Purchasing a home warranty is also a good investment as your home’s appliances age and the manufacturer’s warranties end.
- Convenience: Another benefit of a home warranty is the convenience of a single point of contact for home repairs. The warranty company finds the right service technician for the job, saving you valuable time from researching different providers for each repair.
Knowing What’s Covered and What’s Not Can Save You Time and Money
Many warranty providers offer two to three plans to choose from, so compare each one to determine which one best serves your situation. When shopping for a home warranty company and plan, read the entire plan agreement to avoid surprise costs. Your contract or plan agreement will go into detail about what is covered, what is not covered, and maximum coverage amounts.
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