When Should You Consider Home Warranty?

What Is a Home Warranty?

Anyone considering a home warranty should get advice from their realtor and other experts to determine if it is beneficial in their situation. There are various home warranty plans from 2-10 HBW and other companies selling this form of property owner protection. The homeowner pays a monthly fee, then when service is needed they pay a small service charge.

By definition, a home warranty is a service agreement in the form of an annual contract that covers the costs of repairing or replacing specified systems and appliances in a home. Systems and appliances break down with normal use over time and can be very expensive to replace. A home warranty is a way to protect the family from large unexpected expenses for repair or replacement of covered items in the home.

How Does a Home Warranty Work?

Companies offering home warranties have relationships with networks of independent contractors who provide them with special pricing for repair or replacement of appliances and systems. This saves money for the warranty company by covering repairs to clients.

When a system or appliance breaks down, the homeowner contacts the home warranty representative for service. This representative connects with the appropriate service provider who comes to the home to diagnose the problem and reports it back to the warranty company. The warranty company decides if the issue is covered. If the problem is covered, the contractor receives approval to repair the issue for a predetermined service fee.

Not all problems with appliances or home systems are covered by this service agreement. It's important for homeowners to read the home warranty agreement carefully before signing it. The list of systems and appliances covered should be included, as well as the list of limitations. The homeowner's responsibility is to review the home warranty before calling for service.

What Are the Benefits of a Home Warranty?

A home warranty has several important benefits, including peace of mind regarding home appliances and systems. If these covered systems or appliances break down, there is a small service fee instead of a large repair or replacement bill. For many homeowners, the monthly fee is worth it to avoid big repair bills.

A home warranty helps homeowners plan for potential appliance repair costs and reduces these expenses. When a home has older appliances, home warranties can reduce unexpected repair costs. Home warranties cover appliance problems not covered by homeowners insurance.

Do You Need Both Homeowners Insurance and a Home Warranty?

Homeowners insurance and home warranty cover different things and various types of damage or losses. It can be advantageous to have both for more complete protection against emergencies and home losses.

Homeowners insurance is designed to protect the structure of a house and property from unexpected events such as fire, storm damage, theft, or vandalism. It is essential to have homeowners insurance while there is a mortgage on the home.

A home warranty is voluntary and intended to cover repair and replacement of home systems and appliances due to normal wear and aging. Home warranties do not cover what is covered by homeowners insurance.

What Systems and Appliances Are Covered?

Most home warranties cover all or part of these appliances.

• Refrigerators
• Washing and drying machines
• Furnaces, stoves and cooktops
• Dishwashers
• Built-in microwave ovens
• Garage door openers
• Trash compactors

Home warranties may cover these home systems:

• Heating and cooling systems
• Electrical systems
• Plumbing systems
• Water heaters
• Trash chutes
• Smoke detectors

The homeowner chooses basic coverage up to full coverage with differences in monthly fees. The homeowner should list the appliances and systems they want covered, and present this to the home warranty company representative to get the right home warranty plan for their needs. If available plans do not cover everything the homeowner wants to cover, they can add appliances or systems to the plan for an additional fee.

What Is Not Covered?

Home warranties will not cover appliances or systems when they include the following.

• Appliances with pre-existing conditions at the time of warranty enrollment
• Damage caused by improper installation or insufficient maintenance
• Cosmetic issues such as dents and scratches
• Damage caused by improper use of the appliance or system or using them outside their intended purpose

In addition to these limitations, home warranty policies will specify maximum payouts. Damage from catastrophes or events covered by homeowners insurance will not be covered by a home warranty. This makes it very important to read the home warranty carefully.

Deciding Whether a Home Warranty Is Needed

When deciding whether to purchase a home warranty, consider the following:

• Newly built homes have builder warranties and new appliances
• Are repair or appliance replacement plans planned?
• If the recently purchased home had recent repairs and appliance replacements with warranty
• The homeowner is able to and willing to do most appliance repairs themselves

Under the above conditions, a home warranty may not be needed or could be disadvantageous. However, if the following conditions apply, consider a home warranty.

• The purchased house is old with outdated appliances
• The new owner cannot or does not want to be responsible for repairing systems and appliances
• The homeowner wants a repair budget and wants to avoid costly surprises
• The homeowner has demanding work and cannot spend time organizing appliance or system repairs, needing the convenience of a home warranty
• The realtor or seller offers a home warranty as part of the deal when buying the house

Each homeowner should weigh the cost of a home warranty against the benefits it offers in their specific situation to make a decision. Home warranties last one year with the option to renew for additional years. The new homeowner may want a home warranty in the first year and then decide whether to renew it.