When you purchase a new home, a home warranty is often one of the potential options presented by the realtors. Unlike your home insurance, which covers the home itself, a home warranty focuses on things that the insurance might not cover, such as the systems of the home and the appliances within it. Understanding the home warranty basics can help you make an informed decision on which warranty is best for your situation.
Home Warranty Basics
A home warranty covers many systems and appliances in your home, but it might not cover everything. There are many home warranty companies, and each offers a variety of options. But ultimately, these boil down to three main types of warranties:
- Systems warranty. This focuses on whole-house systems, such as plumbing, electrical, heating and cooling systems, and in some cases, specialty systems like radiant floor heating.
- Appliances warranty. This covers home appliances, such as the refrigerator, dishwasher, oven, and the like.
- Combination warranty. This covers both appliances and systems.
Add-on warranties are those that allow you to put something else on the original policy for the same protections, such as a pool or outdoor kitchen appliances, for an additional fee.
Just as with home insurance, warranties might not cover everything, or there might be exceptions that could make you scratch your head in confusion. For instance, some home insurance policies say they cover your siding, and they do – but without the “matching” provision in the policy, they don’t have to cover siding that is a perfect match to the old siding, thus potentially leaving you with a strange-looking exterior!
Home warranties are much the same way, in that while an appliance or system might be covered, certain components might not be. For instance, the water heater itself might be covered, but replacing the thermostat might not be. Or the compressor for your air conditioner might be covered, but problems with the ductwork are exempt. Another example is the refrigerator, where the appliance itself is covered, but the optional icemaker is not.
There could also be requirements on your part, such as performing regular maintenance on the appliance or system as recommended by the manufacturer.
What Happens When You File a Claim?
When you get that warranty, keep all the information in a file where you can reference it quickly. If an issue arises with your systems or appliances – such as turning on the oven to find no heat, or turning on the air conditioner to be met with a fan but no cooling – contact your warranty provider through the number listed for claims.
The company has a network of service providers. They will connect you with one of those providers, who will make an appointment with you to assess the problem and determine whether repair or replacement is necessary. This process is usually rather quick, taking a few days to get in touch and get that assessment completed.
Now the exact terms of your plan come into play. The warranty provider might have a cap on what they will cover. They might offer depreciated value on appliances or systems, so you can get your replacement, but they won’t cover the full cost. You might need to meet a deductible. You might also have a service fee, payable to the contractor, for every repair or replacement. In other words, don’t expect full coverage on all the items in your warranty – more than likely, you will have to pay something out of pocket.
Do I Really Need a Home Warranty?
Whether you actually need a home warranty depends upon several factors. Consider these points:
- You’re buying your first home. In many cases, a home warranty of one year or so will be offered by the sellers as a way to sweeten the deal. If that’s the case, by all means, take it! But if it’s not offered, you might want to consider purchasing one anyway. It can give you a “safety net” for your appliances and systems.
- You live in an older home. As your home gets older, things begin to break down. A warranty might be a good idea if your home is of a certain age. However, keep in mind what kind of warranty you choose – one that offers depreciation value only might be useless if it won’t cover that 10-year-old fan in your HVAC.
- You’re going to sell the house. This makes sense if you get a warranty that is transferable to the new owners. In that case, it can help you pay for some of the repairs that might pop up as you get your home ready for sale, then give the new owners some peace of mind – and it serves as a nice little bonus incentive to get a buyer to the table.
- You’re not in the best financial situation. At first blush, it might not make sense to get a home warranty if your budget is tight. However, if you know the days are numbered for your appliances or systems, and you look at the cost of full replacement, you might find that a home warranty is the cheaper, smarter option.
As with any other warranty, always take the time to read the fine print. Some unscrupulous companies might add in high service fees, conditions that are very difficult to meet, or exclusions that mean most of your appliances and systems aren’t covered. Look for these issues buried in the contract.
At the same time, look at online reviews of the companies that offer home warranties, speak to your neighbors and friends about what their experiences are, and speak to contractors who might be able to attest to which companies perform well on warranties – and more importantly, which ones don’t. Look to Modernize to not only help you understand home warranty basics, but also connect you with contractors in your area who can help you further understand what you need to protect your home in every way possible.