The biggest difference between home insurance and a warranty is that home buyers are not required to have a warranty prior to mortgage loans being issued. An insurance policy covers accidents, like fire or flood. A home warranty covers the appliances and systems in a home, like the HVAC or plumbing. A homeowner will get more home protection from a warranty. Basic home services that handle maintenance’ are likely to be covered.
The home sellers are going to be responsible for any preexisting problems. That means that if the air conditioner went out prior to closing, the previous homeowners are going to be responsible for it. It is a considered a preexisting condition, and your warranty’s home buyers protection is not going to cover it. There are exceptions to this rule. You can purchase additional coverage. You can write it into your contract.
If you are planning to purchase a house, you will want to consider all your home warranty options. In most cases, appliances over four years are covered, provided that they are in good working order at the time of the contract. You will want to be prepared to pay a coverage fee and then a deductible per repair or replacement. Most of the time, your deductible is going to be between 50 and 100 dollars per repair. Almost always, the warranty will pay for replacements only if all attempts to make repairs have failed or if replacement is going to be less expensive.
When you are buying a warranty for a home you are purchasing, your warranty will go in effect at closing. You will want to check with your buyer to see if their warranty is transferable, but usually, they are not. In most cases, your warranty will expire at the time that the deed is transferred out of your name. This is one reason you want to make sure that all systems are running and current on all maintenance and repair. Failure to do so may cost you a lot in the long run. You may be denied coverage until you have paid for repairs out of pocket.
As for what is covered, that will depend on your warranty. There are many plans available. You need to research which ones offer what you need. Things like pools, spas, and sprinkler systems will usually need additional coverage. Minor appliances like dishwasher, microwave, and even your washer and dryer can be covered under some warranties. You will want to see what will fit your budget. Ideally, you will talk it over with your broker so that you get the exact amount of coverage you need that will still fit into your budget.
Just as your warranty options are large and wide, your costs will vary with your home warranty as well. For example, you may have the option of paying a higher coverage fee with a reduction of a deductible. Or perhaps, you can pay a yearly deductible cap rather than having to pay for each and every repair or replacement. The amount of your deductible will vary depending on the coverage type and the appliance or system that you need to be fixed or replaced. For best results, research your choices and find one that will give you the coverage that you need while still fitting nicely in your budget.
Are Appliances Covered by Your Home Warranty?
As with any contract, your warranty is going to be subject to negotiation. You will have choices and limitations to what appliances are covered and why. Not all appliances will be covered. There are some appliances that will not be eligible for renewal to your home warranty. There are some home warranties that cannot be renewed at all.
Which appliances, when buying a home, will be covered under your home warranty is often determined by which ones you own at the time of purchasing your warranty. It can also depend on the condition of your appliances. When we think of appliances, you make think washer, dryer, and dishwasher. However, the air conditioning, water heater, plumbing, heating systems, and even your spa may very well be covered. Depending on your warranty, things like the garage door may fall under the category also.
Most often, you will need to schedule a time and date for a warranty inspector to come out. They will take a look at your home, your appliances and evaluate the condition of all. You will then be given the opportunity to cover certain appliances. Basic coverage will likely include the standard systems including plumbing, heating, air conditioning, garage doors, and electrical systems.
If your inspector says that they are outdated, inefficient, or just plain not working you may get an opportunity to bring them up to standard. You will likely have to get repairs and updates done within a specified amount of time. You will probably also have to show who did the repairs and what the repairs were. There are contractors that will work right with the home warranty company, but often times it is up to the homeowner to tackle the original repairs and paperwork.
In order for an appliance or system to be covered, it must be in proper working order at the time that the home warranty takes effect. If a system cannot be covered, it is highly likely that you won’t be able to add it until the next time you renew your home warranty. If you are unsure about whether or not an appliance could be covered, you should write it down and ask your home warranty provider. They can always clarify how and if you can add an appliance.
Which Appliances are not Covered by Standard Home Warranty Plans?
There are a few appliances that aren’t standard. It is pretty much anything that you would not normally inherit when you buy your house. Think about it this way: Would you expect it to be included when you sign your contract on your home? If so, then it would probably be included in your home warranty.
You would not expect a clothes washer, clothes dryer or microwave to be left behind by the seller. However, you can negotiate with the seller for your appliances. Your dishwasher, stove, refrigerator and your spa are all optional appliances that you may need to purchase extra warranty for. The amount of the extra coverage may vary.
Keep in mind that these are still subjected to inspection. Even if you are paying for extra coverage, they must be in working order at the time of inspection. There are cases where you will be given time to get it up to standard, but because they are optional, you may not be able to repair them.
Also, if you purchase a new appliance, you may be able to add them to your home warranty without too many issues. You may have to show proof of purchase. You may also need to add them to your home warranty within a certain time frame. You may not have to do an inspection if you can show that they are brand new and that you are adding them warranty as a brand new item. A rebuilt, certified pre-owned or a used appliance will probably have to be inspected or otherwise proved to be in good working order.
What Information Should You Disclose?
When you are looking to invest in a warranty, you are basically investing into a network that will help you to identify and solve problems. You will want to make sure that you are telling the home warranty companies everything that could affect the decisions of both parties.
You are going to subject your home to a series of inspections and tests, so it is best to be upfront with your home warranty brokers about problems you foresee. It will equip them with knowledge that can help to lead you towards a plan or contract that is best suited for your needs. No one wants to spend time or money on something that they don’t need or won’t ever use. Communication will help to ensure that this doesn’t happen. Keep in mind that there are options and plans to fit all kinds of needs and you want enough coverage to handle all situation but not too much that you will never use. After all, why do you want to cover potential tenants if you don’t foresee subletting your house? That is just one example of modifications or extras that you may or may not need.
Your broker’s job is to make sure that your needs are met. They cannot assess your needs if you don’t let them know what they are honestly and clearly.
How do I Find out if My Repair is Covered?
Finding a contractor to do repairs that will work with your home warranty is important. A good contractor will be able to fix your appliances following the guidelines set up in your contract. They will have a good standing with the BBB, including a high BBB rating. Why is that important?
The BBB sets standards for contractors. It will record how long they have been in business, how they respond to complaints, how they handle contracts and even more. It makes the company responsible for someone besides their clients. It will ensure that you are getting quality work for the cost of the work. It is like having a security blanket for both the contractor and the client.
Within your warranty's contract, you will find a set standard for costs. It will detail which costs you are responsible for. The amount that you have to pay is the deductible. The deductible is likely to vary depending on the appliance and will vary per repair. For example, you may need to replace your septic system. The contractor will tell you that it is 5,000 dollars. Your deductible is $500. So, you will pay the deductible and your home warranty will cover the rest. Depending on how your contract is set up, you may only have to pay this one for the year or you may have to pay it based on the amount of the repair. For example, now that you spent the $500 and the septic was replaced, your hot water heater has begun to leak. Your home warranty may cover it since you have already paid the deductible for the year, or you may need to pay another share of the deductible. It is very important that you read the fine print so that you are clear as to what the warranty covers and what the cost of your deductible is.
The contract is the legal agreement between you and the home warranty company. It means that they are legally required to hold up to their end of the agreement. It also means that you must uphold yours. The fine print will let you know all the costs, the procedures, and the requirements you are responsible for. Do not hesitate you ask questions about what you don’t understand. This is simply not something that you want to hastily sign. Take your time and read it thoroughly because it is legally binding. Home warranties are definitely worth the money, but you just have to understand what you are getting into before you sign any paperwork.
How do I Read a Contract?
Before you sign your contract you need to make really sure that you understand how to read it. You need to understand the terms. The terms of a contract can be very confusing. It is easy to get lost in the wording. If you try to skim through or skip through pages, you are easily going to get lost.
The way that contracts are set up is in articles. Each article is a section. They are usually numbered. Depending on which part of the contract that you are in, you will see terms that will relate to your coverage options. You will need to understand what your coverage options are. You will need to understand which contractors are covered under your warranty. There are going to be articles and subsections that may not be related to your coverage options. You need to verify, with your broker, which articles refer to your coverage options and which ones are not covered. You may want to have the contract modified to specify exactly what your coverage options are.
Part of your contract is going to specify which contractors are covered. There will specific details regarding what your coverage is regarding costs and options. Your coverage options will determine which contractors are qualified, according to your warranty, to repair your appliances. These coverage options will affect your costs.
Failure to follow the contractor guidelines in your coverage will not only escalate your costs, but it can also void your warranty. It is one of the many reasons why you need to make sure that you understand your warranty coverage and your costs. You will find that all your home repairs will have specified contractors that will offer you only the best quality services. If you do happen to have repairs done that you aren’t happy with, there will be procedures set in place so that issues are resolved.
Your home warranty is a way to take the stress and drama out of home repairs. You aren’t going to have massive amounts of money coming out for emergency repairs. You are going to be sure that your contractor is doing the best job that they can on repairs and that if it cannot be repaired, you are getting a new appliance. You will also find that any repairs that you have done, including replacements, will then affect your home warranty. You have protection in knowing that all your appliances will be properly maintained and cared for. You have protection in knowing that you and your family are covered in an accident or home emergency. That peace of mind is well worth investing into.
Does a Home Warranty Offer any Home Buyers Protection?
When you buy a home, you usually have 30 days in which to purchase your home warranty. This 30-day window has multiple benefits. Not only does it give you buyer’s protection, but it also gives you time to cancel your warranty without stressing over a cancellation fee. Often times, your warranty will not be effective for 30 days after purchase.
A warranty is different than homeonwer's insurance. It is more the maintenance and upkeep on your home. You need to weigh the pros and cons of each before you make a choice, should you decide you only want one. Both home warranties and insurance have great pros and serious cons, but they usually work well in harmony with each other. Just make sure to read the fine print so that you understand the fees with both.
An extended warranty may have a nominal fee, however, the deductible will cover things such as the electrical systems and maintenance. You can usually get a free quote on one, but read the fine print to ensure that you are getting the coverage that you really want. Sometimes the fees are well balanced and can be combined with your insurance to keep your deductible within your budget. The more you put into your home warranty, the more that you are going to get out of it.
When you buy your warranty, you will have a window in which you can decide if the warranty is for you. You have a chance to review it, usually 30 days from the signing date, and decide if it will be enough or if you will need an extended warranty. Of course, you can decide if you want to use it at all. The concern should be on the appliances, the home systems, and the contractors. If you don’t own all the home systems that it covers, you may want to find a different one. For example, if it includes central heating systems, but all you own is central air, you may want to see if it allows you to add central heat to your home. Updating is often covered under the extended warranty to allow you to make your home more energy efficient and environmentally sustainable.
The thing that you must remember is that the systems and appliances that are covered under your warranty can vary depending on your coverage. If you chose a contract outside the warranty guidelines you void your warranty and essentially set yourself back. Always make sure that you understand what you are getting. Don’t be afraid to ask questions. Don’t hesitate to do your own research. It is an investment in your home and your future. Take it seriously and it will save you time, money, and your mental health. Read the fine print. Don’t skip through because you think you have a good idea what it says. You have a 30-day buyer protection window for a reason.
Can Real Estate Professionals Assist with Buying a Home Warranty?
The first place you may want to look for a good home warranty is your real estate company. There are many real estate professionals that handle the refinance side of applications. A realtor can help you with the realtor survey which can give you a good idea of what problems the warranty company is going to detect.
The process of purchasing and signing a home warranty can be quite lengthy. You may mean that you need to do some deep research into home warranty companies and home warranty plans. You may need to read several home warranty reviews per single home warranty company in order to find the ideal home warranty policy. Home warranty providers are going to offer a wide variety of warranty plans, warranty policy, in which you will find a range of warranty coverage. You may need to get a series of quotes from many providers. The quote process itself may be lengthy and difficult.
The first thing you want to do after sifting through warranty reviews and warranty companies is to schedule an appointment with your first choice warranty company. At your first appointment, you will go over what you are expecting from a home warranty company. You will find that they usually have a list of different warranty policies to choose from. The warranty premium is successful to vary with what type of coverage that you want. You will select your policy. You will discuss the choices that you will have for contractors. It is important that you understand your options. It is important that you make sure that your contractor list covers your area.
The next thing that you will do is schedule an appointment for your home to be inspected. You will need to make sure that you understand the timeline so that you plan enough time. Ask what all will be inspected, but you need to expect every major appliance and system in your home to go through a rigorous series of testing. You will also be bombarded with a barrage of questions. Which is likely to lead to the next step.
In some cases, you will not get an answer on how your home inspection went. You may have to schedule an appointment to see what did and didn’t pass inspection. You will then be given a time frame, usually 30-days, in which to make repairs. These repairs will often require a secondary inspection.
Once all the inspections are finished, you will have a better idea of which warranty policy is best for you. Then you will have a set premium. You will also have a list of services, contractors, and deductibles. You will have a closing date. You should also have a buyer protection plan of about 30-days.
Once your warranty is all set up and ready to go, there will be a process in which to file claims. There are some cases that it may take several weeks to get a repair done. It all depends on both your home warranty provider and your contractor choice.
Have you ever wondered why it takes you so long to get a claim processed? Perhaps you are just wondering why it is taking so long to get an approval on your application? While there may not any set reason why it is a long process, there may be a series of reasons why it is taking so long. For example, your home warranty service may be having trouble get the records from another warranty company. Perhaps the former homeowner had a different home warranty provider or less coverage than you, and they are having trouble getting the maintenance and repair records. It may be that they are having trouble getting confirmation of your bank statements from your financial institution. Don’t be afraid to call and politely ask what you can provide to help speed up the process.
How do I File a Claim with My Home Warranty Company?
Usually, you will need to call the company and file a claim. Then you will take that claim number and call your contractor for repairs. These repairs will need to be scheduled. You will have to pay your deductible. Sometimes, they ask that you set up a credit card in order to help speed along claims. The best thing about the home warranty process is the home buyer’s protection that it offers. Not only to do you have a great way to protect your home and your budget from unnecessary repairs, but you also have a way to file complaints against contractors. Your home warranty is a home buyer’s guarantee against fraud and major budget hits.
You also have a customer service team that will help you to go through the process. It is something that you may have to do when you get ready to purchase a home. Your home warranty provider can help you navigate through the hassle of quotes and repairs. You will be able to ask questions so that you can understand rate coverage and deductibles.
The repair process must be completely exhausted before the replacement process can even begin. The repairs must be done by a contractor that is on the home warranty provider’s approved list. If they cannot be repaired, then they will be replaced. There is another process for all replacements.
Who do I Call for Repairs?
When you need service you are going to have to schedule a service call. There will be a setup process that will fall within your service contract. You will need to talk to your service provider to find out what service fee schedules you have. These service fees will vary depending on what services you are requesting. Depending on if it is scheduled maintenance, you may not have a service fee due at that time. Service fees are completely different than your deductible and may be included in your deductible.
Selling Your Home? What Happens to Your Warranty?
Chances are that you purchased your policy to give you peace of mind. You probably picked up your policies at a premium price. This is a great idea, especially if you have an older home. In older homes, the kitchen is more likely to get leaks, creaks, and moans. In most cases, the sellers home warranty is not going to transfer. Policies are not transferable, in most cases.
A home warranty is the best way to get the home protection that you need. It will help you to keep your real estate in good condition. It will also help you to make sure that you are not caught off guard by extreme and unexpected repairs. Not only does it help to patch the holes that you may have in your home insurance, but it also makes sure that you have peace of mind should major repairs come up. You know that you are going to be able to get a good contractor that will give you great service. If you get less than expected, you will have a way to get your complaints addressed. Your problems are solved. Don’t hesitate to invest in a good home warranty protection. You will be very glad you did the moment that you need it.
What is home warranty insurance and what does it cover?
Home warranty insurance goes beyond your regular homeowner’s insurance as it directly covers the home appliances and major systems in the home. It also takes care of any major repairs or replacement due to normal wear and tear. Typically, home warranty insurance provides coverage for one year at a time. The best home warranty? Well, the most typical purchases are current home owners who are selling their home and wish to give the new buyer some peace of mind. Less common purchasers are future home owners constructing a new home who wish to cover things such as a contractor who fails to finish, falling behind schedule, or even dying during the project.
While every policy is different in terms of what is covered and what is not, typically, a home warranty policy covers the home appliances such as the dishwasher, refrigerator, oven, stove, microwave, etc. Systems can also be includes such as the furnace, AC units, water heaters, etc.
You should understand that if you are selling your home and the dishwasher just broke, you can’t get a home warranty insurance policy and say, “Hey! The dishwasher needs repair.” Every appliance and system that is covered in the policy must be in proper working order when the contract goes into effect.
What is the average cost of a home warranty?
The average cost of a basic coverage plan ranges from $350 to $600 per year, with an enhanced plan costing an additional $100 to $400. Prices reflect not only coverage, but also a company's loss history, which is determined by how often an item breaks down and the cost to repair it. For example, if you have appliances that have a history of break down, your cost will be higher than if you had appliances with a top dependability ratings.
What are the differences between a home owner’s policy and a home warranty?
Both homeowner’s insurance and home warranty contracts are designed to help you in the event you suffer loss or damage to your home, your home’s systems, appliances, or belongings. There are instances where coverage does overlap, but for the most part, the coverage is different and it is a wise decision to have both to give you the peace of mind you need with the high cost of repairs and replacement.
Homeowner’s Insurance – normally covers the structure of your home, your personal belongings, including furniture, and other structures on your property that suffer damage caused by fire, storms, robbery, etc. There are exclusions in a homeowner’s policy (many, many exclusions), so make sure you completely read your policy so you know what you are covered for and, more importantly, what you are not covered for.
Home Warranty – covers repairs and replacements on the major systems and appliances within your home that fail due to normal wear and tear. The systems and appliances must be in proper working order when the contract is entered into with the home warranty company.
The best way to understand the difference is to take a look at a few examples:
Issue: Heavy rain causes a break in your foundation and results in major water damage to your home.
Result: Typically this is NOT covered by either homeowner’s insurance or a home warranty as this is considered “ground water” and nearly every homeowner’s policy has an exclusion for “ground water.” This is exactly why you need to READ your policies before agreeing to them so you have complete understanding of what you are covered for and what you are not covered for.
Issue: A major hail storm causes damage to your roof.
Result: This would typically be covered by your homeowner’s insurance. There isn’t usually a hail exclusion, but refer to your policy for coverage options, as standard policies cover structural damages caused by hail.
Issue: Your furnace stops working in the middle of winter.
Result: Covered by home warranty.
Issue: A grease fire in your kitchen damages the walls and cupboards in your kitchen.
Result: Homeowner’s insurance will cover loss due to damage to the home’s structure, including fire damage.
Issue: The microwave stops working because your child put a metal fork and turned it on.
Result: This would not be covered by home warranty policy because it resulted from negligence and not from normal wear and tear. Nor would it be covered by homeowner’s insurance because it is not a loss due to robbery or a storm.
Issue: The refrigerator breaks down completely.
Result: Home Warranty. Typically all appliances are covered for all repairs or replacement, unless otherwise stated in the contract, for all repairs or replacement.
Issue: A major wind storm blows a tree onto your house.
Result: Homeowner’s insurance will cover all repairs associated with the damage caused by the tree.
Issue: The air conditioning unit fails.
Result: Home warranty will cover the repair or the replacement (based on your contract) for the unit.
What are some of the most popular home warranty companies?
Here are some of the most popular home warranty companies. This list is just that, most popular, and does not reflect an endorsement of any company listed.
Choice Home Warranty
Select Home Warranty
TotalProtect Home Warranty
Fidelity Home Warranty
First American Home Buyers Protection Corporation
Delta Home Protect
Blue Ribbon Home Warranty
American Residential Warranty
American Home Guardian
DTE Home Protection Plan
HSA Home Warranty
American Home Shield
1st America Home Warranty
Cross Country Home Warranty
Is a home warranty worth the cost?
According to the L.A. Times, homes with home warranties sell, on average, 11 days quicker, and for $2,300 more, than those that don’t. However, there is a consumer organization, which states that a home warranty just isn’t worth the cost which can average $400-$600 per year.
According to respected Consumer’s Checkbook, it is a wiser choice to place the money into a “home repair fund” should the need for it arise. They state that it technically is not a “warranty” that you are buying, rather a “service contract” to protect you against the high cost of repairs to major appliances, heating and cooling systems, electrical, plumbing and water systems, etc.
It should also be noted that when a claim is made you have no say in the contractor that is used for the repair. The home warranty company will make that choice for you.
While Consumer’s Checkbook makes a good argument against a home warranty, suggesting that the majority of the time nothing goes wrong and it is just “wasted money” that could have gone to something productive, the bottom line is that a home warranty policy still it gives peace of mind to the buyers. That is key, along with knowing that a home with a warranty sells faster for more money than those without.
Key point: Homes sell for an average of $2,300 more with a home warranty, and a home warranty will run typically $400 – $600. That sounds like a sound investment.
Check Best Home Warranty Reviews for the most current information on who is the best home warranty company and detailed information so you can make the proper choice. You can also get rating on the top rated home warranty companies too.
What are the benefits of a home warranty?
A home warranty benefits both the buyer and seller. Here is a breakdown:
Benefits to the Seller
- Free coverage during the listing period. Free? Yes, free. The home warranty is not actually paid for until closing, so the seller receives free coverage during the time the home is listed for sale. This is a major benefit that most home-owners do not know about.
- Added buyer confidence knowing that if anything goes wrong post-sale, they will not be out a large sum of money for repairs.
- A competitive advantage over other homes in the same price range as your home that do not offer a home warranty.
- Post-sale headache prevention. Many times when things go wrong with a major system or appliance, the sale of the home can be disputed by the buyer. The home warranty prevents such disputes as the repairs are fully covered.
Benefits to the Buyer
- The buyer not only receives coverage to give them piece of mind, but they will also have an opportunity to upgrade the coverage after the closing (at their own expense) for better coverage for their needs.
- Complete Peace of Mind – no stress over “what happens if we move in and the first week the furnace goes out?” Knowing that all repairs are covered for the first year will allow the buyer to sleep well at night.
- Renewable coverage. It doesn’t have to end after the one-year contract. The service can be extended for as long as the buyer wishes to have it in place.
Other benefits you should seek when picking out a home warranty plan:
- one call claim service (you don’t want to be put on endless holds or given the run around)
- quick and efficient response time from customer service and the service contractors
- customer service that is reachable, friendly, knowledgeable, with great follow-through
- most major systems and appliances are covered
- a flat service call fee with no surprise fees or charges
- online access to your account so you know the current status of all claims
- renewable coverage if you want to extend beyond the one-year contract
- pre-screened, experienced, reliable, and qualified service contractors
- if the system or appliance cannot be fixed, it will be replaced with a similar make and model
What is the difference between premium and optional coverage?
Premium Coverage varies with each provider, but generally speaking allows you to cover parts that are not typically covered by a standard home warranty contract. For example, for your dishwasher, the typical contract will cover the function of the dishwasher, not the rollers, baskets, seals, etc. Ask about premium and optional coverage from the company you choose to go with. You will be amazed at the different choices you have available and what you can have covered to give you complete peace of mind either while your home is listed for sale as a seller, or post purchase if you are the buyer.
Optional Coverage would include things like, pools, spas, second refrigerators, stand-alone freezers, wet bars, ice machines, wine coolers, wine cellars, and more.
What are the drawbacks of a home warranty?
Did you know that nearly three-quarters of home-buyers reported the failure of not just one, but at least two major systems/appliances within the first two years of ownership? In California alone, over 90% of home sales include a home warranty. However, the contracts vary and not all repairs are covered which causes undue stress for the new homeowner who thought they were covered, when in reality, they were not.
The biggest drawback of a home warranty is when the contract inclusions and exclusions are not properly explained and the new homeowner doesn’t take the time to actually read the service contract. Doing so will eliminate future stresses and ensure you get the proper coverage you want at closing instead of a “bare bones” contract that makes it sound like everything is covered when it really isn’t.
Service Calls – most new homeowners do not realize that they are responsible for the service call fee when there is a problem with their appliance. Contracts from reputable companies will charge nominal fees, but fly-by-night companies can charge fees as high as $500. This is why you need to know what all the fees, inclusions and exclusions are.
No Control – you don’t get to pick the service company, nor do you have any input as to whether the system or appliance should be repaired or replaced. You may have a system or appliance that is obsolete and should be replaced, but the service contract company can choose to simply repair it.
Time Range – what is the time range for repair or replacement? Some contracts allow for 90 days. Read the contract term so you know. Do you really want to go through life without a refrigerator or with no heat in the winter for 90 days? Of course you don’t. Know the coverage and if it is not up to your standards, request the seller to increase the contract to your needs at their expense or you will walk from the deal.
Caps on Repairs/Replacement – some warranty contracts have caps, which can cause big problems for the homeowner. For example, if a replacement for a defective refrigerator is $500, but the refrigerator in the home will cost $2,500, the extra $2,000 will be absorbed by the homeowner. The same is true for heating and cooling systems, which can be major expenses. If there are caps, the homeowner will have to meet the extra expenses which completely takes the “peace of mind” aspect of the home warranty contract off the table.
How to determine if you need a home warranty?
Did you know that one out of every five homes in the U.S. has a current home warranty contract? One of the biggest issues with home warranty companies is that they are not regulated in all states, which has left many homeowners feeling ripped off.
Determining if you need a home warranty is based solely on you and your needs. Do your homework and actually READ what the home warranty company is proposing. Don’t take the sales person’s word for it, as what is in writing in the contract is what is going to be binding. Make a list of what you want covered and what your stress areas are. Maybe you are concerned about the heating system. It is old and you worry it will go out soon. A home warranty contract can protect you from huge expenses for repairs or full replacements. However, nearly every home warranty contract comes with exclusions. This is why reading the contract and asking questions is vital in your search for the right company and the right contract.
If this is a new home construction and your builder states a home warranty contract will be in place for the first year, and you have experience with home warranties from a previous home purchase, you still need to read the contract as new home purchase warranties are vastly different than those for a previously owned home.
Service Fees – you should know how much you are responsible to pay for the service fee and the time frame in which the repair/replacement will take place.
The Cost – while you may think the contract is highly affordable, it can also come with exclusions and caps. This is when you refer to your needs and your stress points. Ensure they are being completely met at every level. Also, just because a policy is expensive doesn’t mean it is good. Read every contract and ask about anything you do not understand. There are plenty of home warranty companies and walking away from one that makes you feel uneasy is one of the best things you can do.
Service Technicians – while you have no control over which technicians are used for your repairs, be aware that the service tech could attempt to sell you one of their own service contracts as well.
Weigh the Costs – If you are living paycheck to paycheck, it may be a wise move to purchase a home warranty contract, and keep it beyond the first year. If your cooling system goes out and it will cost $5,000.00 to replace, that could potentially financially ruin you. However, the home warranty is $600 a year, which is $50 a month, and will cover it. Even after you pay the small service fee, your problem will be taken care of and you won’t be in financial ruins.
Company Reputation – do your homework on the company you are considering. Check out their history, ratings and reviews. You don’t just want to check their customer service history, but also ensure they are financially stable. The last thing you want to enter into a contract with a company that is near bankruptcy.
If your home is new or your appliances are new, getting a home warranty is usually not worth the cost as the chances of the appliances failing is rare, and if they do, they are usually covered by the manufacturer’s warranty.
Repair vs. Replacement – Understand the home warranty company’s stance on this as it is vital if you have an older home. Consumer Reports advises that any appliance more than 7 years old should be replaced instead of repaired if there is a problem. However, the home warranty company may decide, due to costs, to opt for the cheaper repair than the replacement.
Should I get a home warranty when buying a house?
You can opt for this on your own, but this is something which you should demand from your contractor (if it is a new construction home) or from the sellers (a currently built home). You can, on your own, choose to increase the coverage per your needs, but it is highly recommended that you have coverage for at least the first year of ownership so you don’t walk into a situation where major systems and/or appliances fail, as most people are cash strapped after closing costs and down payments are made on the home.
What is a Trade Call Fee?
Most people think that when they have the home warranty insurance that the repair is completely taken care of. That is not exactly how it works. A trade call fee is similar to the co-pay you have when you visit the doctor. This covers the service contractor to come to the home to diagnose the problem. Read your contract carefully as this trade call fee will be clearly stated and if there are any exclusions for services they will be listed as well. Do NOT just take the underwriter’s word for it, actually READ the contract and ask questions on anything you don’t understand. The last thing you want to happen is thinking you have a policy that covers you and then find out later there was a strange exclusion and you are on the hook for the entire repair or replacement.
On average, this fee ranges from $75.00 – $100.00 per claim.
How do home warranty companies make money?
In the same way insurance companies make money, home warranty companies know of the percentage of contracts they sell which will have a claim filed and they know the average cost per claim. Thus, they price the contracts based on this information to eliminate their risk and assure they will make a profit.
Is there a waiting period before a claim can be submitted?
This depends on the home warranty service contract you decide on. Typically there is no waiting period, but some contracts have a 30-day exclusionary period. Check your contract carefully.
Why are some claims denied?
Most home warranty contracts cover systems and appliances that fail due to normal wear and tear. However, if the system or appliance stops working due to failure to maintain it properly, if it was installed incorrectly, or if it was modified beyond manufacturer’s recommendations, it may not be covered. Also, some parts and labor may be excluded as well. Check your contract for these exclusions.
How do you properly compare home warranty companies?
While most consumers look at price as a way to compare, you must dive in deep so you get the absolute best coverage for the price. Here are the top ways to compare:
- cost of the contract
- contract period
- cost of service visit
- guaranteed service response
- customer service hours (open late and on weekends)
How do I deal with home warranty companies if I have a claim?
The best thing you can do is report the claim immediately. Don’t wait a day or two; make the call or fill out the online claim right when it happens. The longer you wait, the longer it will be before the service call occurs.
If I have a pool or a spa, can they be covered with a home warranty?
Yes they can, but it would be an optional coverage and usually not part of a standard contract.
What if the systems in my home and my appliances are old?
Home warranties cover both new and older systems during the contract period. Generally, there are no age restrictions and no inspection is required. All that is required is that the appliances and systems are in good working order at the time of the contract’s effective date.
Who regulates home warranty companies in California? In Florida? In Arizona? In Texas?
The Commissioner of Insurance regulates home warranty companies in most states. There are some states where there is little to no regulation for home warranty companies. Always contact your state’s Commissioner of Insurance to get up-to-date information if your state regulates home warranty companies and to what extent.