Home Warranties: What is Covered and What is Not?
Home warranties are a controversial subject. Many people will tell you that they are a waste of money, while others swear by them. The reality is, they are probably somewhere in the middle, useful for some situations but often a questionable expenditure in others. Here’s how you can navigate this complicated topic.
What is a Home Warranty?
Home warranties are designed to protect appliances and some of the essential systems in your home. They are not the same as homeowner’s insurance, neither are they a replacement. Home warranties do not cover perils such as fires, structural damage from storms, property crimes and the like. Instead, they cover specific items within your home.
When you purchase home warranty coverage, what you are essentially buying is discounted repair and replacement service on a variety of your home’s major components.
Signing a contract with a home warranty company requires you to pay a service fee, in addition to the money that you have already paid for the warranty, in order to have your appliance or a covered system repaired.
What Does a Home Warranty Cover?
Most home warranty policies have a variety of components that include basic coverage as well as optional packages that provide you with additional coverage for additional feels. What you’ll usually find is base coverage, which varies according to each home warranty company.
The types of items that home warranties can cover include:
- Washers and dryers
- Kitchen appliances such as stoves, dishwashers and refrigerators
- Plumbing systems and water heaters
- Central air conditioning and heating systems
- Main electrical systems, though they would not likely cover the cost of replacing a ceiling fan, since it’s a “fixture”, without another incident involved in why it broke.
General warranty coverage also usually includes items such as doorbells, garbage disposals, ceiling fans and telephone wiring. Add-on policies can cover things such as in-ground pools and other outdoor items, but they need to be disclosed to your home warranty company in advance of coverage being applied.
Because policies vary widely, you cannot automatically assume that all items in a given category will be covered. Items that are often not part of a plan include:
- Faucet repairs
- Outdoor sprinklers
- Items known to be broken prior to the sale of a home
- Haul-away costs
- Exclusions as noted by your policy
Therefore, it’s crucial to read the exact warranty language on the main part of your policy to fully understand your coverage before you sign it. Most of the complaints against home warranty companies come about because policyholders don’t fully understand the terms. Be sure you understand the language about what qualifies for repair and what can be replaced.
With home warranty coverage, most companies will let you pick and choose what you want to cover.
- What if I only want coverage for my heating and cooling system?
Many policies will let you buy specialized policies such as those that only cover mechanical systems.
- Does the same thing apply if I only want to cover my major appliances?
How a Home Warranty Works
When you contract with a home warranty provider, you probably won’t be able to use service contractors that you have dealt with in the past. Every home warranty company has agreements with a list of service providers that they have approved. Under terms of your agreement, you’ll have to call the home warranty company to get the needed work. In turn, the company contacts one of its providers who call you to set the appointment to send a technician to your home.
If the provider deems that the repair or replacement is covered by the warranty, the work is performed and you’ll pay a fee to the company providing the service. The fee should be clearly indicated on your contract and is usually from $75 to $125. The idea is the fee will be much less than what you would pay for the repair or replacement. If the item or system can’t be repaired, the home warranty company will pay for replacement and installation under the terms of the contract.
- Can I request a specific service provider to come to my home for a repair?
No, the home warranty company assigns the provider to you.
- What happens if the company denies my claim or I don’t like the outcome?
If you received a home warranty as part of a real estate deal, you may be able to contact your real estate agent to negotiate with the provider to devise a solution. You can also go through the warranty company’s appeals process. Before you do so, however, review all of your documents to make sure that your claim is not affected by one of these conditions:
- Code violations
- Improper maintenance
- Improper installation
- Unusual wear and tear
- pre-existing conditions disclosed in a home inspection
Typical Home Warranty Costs
Home warranties start at about $300 annually and can range up to $800 depending on the add-ons to your policy. The premium is usually paid up front or in installments. Variables that can affect cost include property type and if the home is brand new or over 5,000 square feet. Most home warranty companies have websites where you can get quotes.
Do I Really Need a Home Warranty?
Check to see if your appliances, heating and air conditioning and other mechanical systems are still covered by the warranties that came with the purchase. Remember that you can tailor your coverage to fit your needs.
Home warranties are also recommended for millennials or new homeowners who may not be familiar with the ins and outs of maintenance.
How to Choose a Reliable Home Warranty Company
Home warranty providers vary widely in quality and customer service. To find a reliable one and avoid companies with poor service records, visit review sites to see their ratings, read customer reviews and to compare the advantages and disadvantages of each company listed.