When major appliances in your home break, it can be an unexpected and often expensive repair or replacement cost. To mitigate the associated risks, many homeowners choose to purchase a home warranty to cover their major appliances. For those interested in coverage, you must understand what’s covered, when you’re covered and how to find the optimal home warranty plan for your specific situation. Additionally, understanding how home warranties differ from homeowner’s insurance is key to effectively protecting your property.
What is a home warranty plan?
A home warranty plan is a contract available to homeowners that you sign guaranteeing coverage for the cost of maintaining certain major household appliances over a set period. These contracts operate similarly to any other warranty you may have had on a single product before, but instead, they cover a list of products throughout your home. Home warranty plans can be paid monthly or annually through third-party vendors. Depending on which service provider you contract through, you will have different options for levels of coverage, deductibles, monthly costs and what’s covered.
Who pays for a home warranty plan?
As a home buyer or current homeowner, you can purchase a home warranty plan at any point in time to cover a newly purchased or currently owned property. But what you may not be aware of is that many home purchase contracts include the seller paying for a home warranty for an agreed-upon period.
Why would the seller cover the home warranty cost for a home they are no longer living in? It can be an integral part of closing a deal by relieving fear or tension a buyer may have about the home. If the buyer knows that if anything breaks after they move in, they are covered, they can proceed with the deal with much more confidence.
If you’re a home buyer, see if the seller is willing to sweeten the deal with a home warranty for some time. If you’re a seller, look at utilizing home warranties as a show of good faith and a bargaining chip to close the deal.
What home warranty plans cover
The list of items covered under a home warranty will vary based on the provider you choose, where you live and the plan you decide on. Typically, most basic plans will cover the major home appliances that would be the costliest to fix. These items include:
- Air conditioning systems and ductwork
- Ceiling fans
- Garage door openers
- Garbage disposals
- Heating systems and ductwork
- Plumbing systems
- Roofing leaks
- Smoke detectors
- Trash compactors
- Washers and dryers
- Water heaters
You must take the time to read your contract and the available options before signing and moving forward. Ensure you have coverage for the items you need and are not paying to cover items you don’t have or don’t need to be covered.
Additionally, take the time to read the particular details of your coverage. Just because an item is on your contracted list does not mean that it’s covered completely or in every situation under the protection plan. For example, most home warranties will not cover cosmetic damage or damage as a result of neglect or misuse. Home warranties often have limits on the dollar amount they will pay for a particular fix. Make sure the allotted amounts are adequate for the products they are intended to cover.
Home warranties vs. homeowner’s insurance
While the two sound similar, they are quite different in how they operate and what they cover. Homeowner’s insurance covers your property in the instance it is damaged through something like a natural disaster, weather, theft, accidents or other possible threats your policy covers. Home warranties, on the other hand, cover the breakdown of home appliances, typically due to normal use or equipment malfunction.
For example, let’s say that your home floods and it ruins your refrigerator. This would likely be covered under your homeowner’s insurance. On the other hand, let’s say it hasn’t rained but your refrigerator motor burns out from faulty parts. This would likely be covered under your home warranty. When weighing your coverage options, it’s important to look at how your desired policies work together.
Is home warranty insurance worth it?
How to find the right home warranty plan
Once you decide you’d like to utilize a home warranty plan for your home, you need to start weighing your options. Some of the most significant factors to consider include:
- The items in your home that you want to be covered
- The value of your items compared to the dollar amount limits in coverage
- Any add-on coverage you’d like to include in your policy
- The process for filing a claim, including requirements, wait time and who can service your appliance
- Requirements for things like proof of proper upkeep or anything else that might invalidate your warranty
- Deductibles charged for service calls and repairs
To find the right home warranty for you and your family, you need to consider all of these elements. You’ll also want to weigh the monthly or annual costs of the warranty versus the coverage you are receiving. Ultimately, having a great experience with a home warranty is about finding a provider and a plan that fits your needs. Ideally, nothing ever breaks, and you never have to use the plan, but you’ll want to know you’re correctly covered in case you do need help.
The bottom line
Home warranties are a great fit for some situations and unnecessary for others. If you determine your home situation warrants coverage, make sure you take the time to shop all available providers, plans and options before proceeding. In a perfect world, you’ll never need to use your home warranty, but you will want to be positive you have the right coverage in case something goes awry.