What Is a Home Warranty?
Let me explain what a home warranty really is. It's a residential service contract that covers the cost of maintaining or repairing your household systems and appliances for a fixed period. Don't confuse it with homeowners' insurance, which handles damage from events like fires or storms, or a structural warranty that builders provide for new homes. This is specifically for existing homes and their internal components.
How a Home Warranty Works
Here's how it operates in practice. If something breaks, you contact the warranty provider. They coordinate with their network of service providers, like plumbers or electricians, to assess the issue. The provider reviews the report to confirm if your contract covers it, and if so, they handle the repair or replacement through the contractor. You pay a service fee for each claim, typically between $55 and $150.
What Home Warranties Cover
These contracts usually cover major appliances such as water heaters, stoves, and refrigerators, along with systems like HVAC, plumbing, and electrical. Read the fine print carefully, as some include garage door openers in basic plans, while others require extra premiums. You might add coverage for things like pools or spas, but not all providers offer it. Remember, each serviced item incurs its own fee, so if multiple things break, costs add up.
Home Warranty vs. Home Insurance
Understand the difference clearly. A home warranty deals with wear and tear on your home's systems and appliances, keeping them functional. Home insurance, however, protects the structure and contents from losses due to disasters like fire or floods. When buying a home, especially an older one, you might not know the maintenance history, so a warranty can save you time and money on repairs, unlike insurance which doesn't cover breakdowns.
Home Warranty Qualifications
Not everything qualifies for coverage. Providers can deny claims for pre-existing damage, so get a home inspection before buying and have the seller fix issues. They also won't cover items that were poorly maintained, improperly installed, or misused. Builders might include warranties for new homes covering structures for up to 10 years, but for existing homes, sellers or agents often provide a one-year policy to sweeten the deal, which you can renew.
Home Warranty Costs
Expect to pay between $432 and $816 per year for basic coverage, depending on what's included. Add to that a service call fee of $55 to $150 per item repaired. If the repair costs less than the fee, you just pay the actual cost. For bigger jobs exceeding your policy limits, you'll cover the difference. Weigh these expenses against potential out-of-pocket repairs to decide if it's worth it for your situation.
Home Warranty FAQs
You might wonder if a home warranty is actually for your house—no, it's for the appliances inside. You don't have to buy one, unlike mandatory home insurance, but consider it for older homes with aging appliances. A residential service contract is just another term for this, protecting your systems and appliances from breakdowns during the covered period.
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