A home warranty plan should not be confused with home owners insurance. A home warranty plan covers certain things that could go wrong within the home. This means it provides protection for internal systems of your home. The normal period of coverage for a home warranty plan is a year from the date of home closing.
What does a home warranty plan cover?
There are several types of home warranty plans in the market. Mainly the warranty will cover heating, plumbing, water heaters, electrical and appliances including microwave oven, dishwasher and garbage disposal. It's main aim is to put less risk on your home budget. When something goes wrong, the warranty company will either repair or replace the home system.
How does the home warranty work?
A home warranty is a service contract. Even though specific plans provide precise types of coverage, many plans operate the same way. Here is how it works:
- In case a home system breaks down or stops working, the home owner should call and report the problem to the home warranty company immediately.
- The moment the claim is updated, the home warranty company will call a provider with which it has a business agreement.
- Then the service provider will call the home owner to schedule and make an appointment.
- The service provider person will fix the problem. In case a home system is malfunctioning and cannot be repaired, the home company will replace the system.
- The home owner is expected to pay a trade service fee which should be less than $100. The amount is due when a service contractor visits your home.
How much is the cost?
You can purchase a home warranty either for a yearly or for a monthly fee to cover repair or replacement of your home systems. A home warranty plan is fairly inexpensive. Depending on the coverage, it ranges from $250 to $400. Once you decide on the home warranty plan, you can decide to pay one lump sum for the whole year or the same cost can be broken down into monthly or quarterly payments. Once the policy expires, it can be renewed.
The moment any of your appliances breaks down, you will pay the service fee and rest will be on the home warranty company. From time to time, home warranty companies run special sales offering additional coverage for the same cost or offering discount policy prices. It is therefore important to do some research about various companies before choosing one.
Who Pays for the Home Warranty?
On who pays for the home warranty, the seller or the buyer can pay for it. It will depend on your local customs. In many areas, it is the seller who pays for the plan because it a seller’s benefit. This is to ensure the buyer will not be calling the seller after closing if a system breaks down. Several real agents also give buyers the home warranty as a special gift after closing.
Do you really need a home warranty?
A home warranty plan is very essential. After you are exhausted with all your saving by purchasing a new home, any maintenance and servicing of your home systems will be taken care of by the warranty company. Therefore, considering a home warranty plan is very important.
Types of home warranty coverage
Since there are different home warranty coverage plans, you need to know and ask what is covered in your plan. Ask your real agent any question on any part of the contract. Ask if the upgrades are available, whether the home warranty company will pay for repairs to all your appliances and systems and know the systems which are not covered.
When does the coverage begin?
A home warranty policy begins the moment you apply for it. The premiums should be paid before validity time expires.
What if you differ with the diagnosis?
At times a service provider can reject a claim. If that happens and you are unhappy with the service provided, the good thing to do is to call your real estate agent and complain. If your real estate agent has a good working relation with the service provider from the home warranty company that is covering your home, he or she can seek out resolution for you. So the best way forward is to call your real agent if you disagree with the diagnosis.
Home warranty general coverage
In general a home warranty plan covers systems and home appliances such as water heater, air conditioning, doorbells, dishwashers, furnace, duct-work, ceiling fans, garbage disposal, and electrical systems, inside plumbing stoppages, telephone wiring, and oven among other systems.
What is not covered?
The home warranty plan will not cover outdoor items such as sprinklers. Tap repairs are also not covered under all plans. Some plans do not pay for washers, refrigerators, garage door openers and dyers.
What can cause denial of payment?
Some of the things that can cause denial of payment include improper maintenance, unusual wear and tear, code violations and improper installation.
How do you choose a home warranty company?
The real estate contract should specify the amount, if any; the seller is providing you with towards a home warranty. Basically, a year home warranty plan is what majority of the sellers are willing to pay for the buyers.
You real estate agent should help you choose by providing you with several brochures of various home warranty companies. Narrowing the choices down to just one home warranty company will be up to you. When choosing a home warranty company, it good to compare the level of coverage offered, the amount of fee charged, and the duration the company have been in operation. This will help you choose the right home warranty company for you.
Here are some of the things to keep in mind about home warranty. Remember that:
- They do cover a lot of home things but they do not cover everything.
- They might not cover the entire cost of replacement or repair due to limits on coverage costs.
- You have a choice of extending your existing contract.