What Is a Home Warranty?

What Is a Home Warranty and How Does It Work?

A home warranty is a contract that covers the cost of servicing household systems or appliances for a certain length of time. Homeowners' insurance is not the same as a house warranty.

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TAKEAWAYS IMPORTANT

• A home warranty is a service contract that covers the cost of servicing household equipment or appliances for a predetermined period of time.
• When purchasing an older property with limited information about the components, home warranties are frequently recommended.
• These guarantees are distinct from homeowner's insurance, which protects the home and its contents in the event of a fire or other natural disaster.
• The cost of a home warranty can range from $350 to $600 per year, with a $50 to $100 premium for each item serviced.

What is a Home Warranty and How Does It Work?

When a home appliance or system breaks down, the homeowner calls the home warranty company. Typically, the warranty firm collaborates with one or more home service providers, such as plumbers or electricians. The warranty company requests services from one of its partnered providers after being notified of a claim. The partnered provider will assess the damage and provide a report to the warrantor.

The evaluation report discloses the amount of the appliance's damage as well as the possible reasons. If the policyholder's contract covers the appliance or system for the evaluated damage, the home warranty company confirms it. The warrantor hires the contractor to repair or replace the system if it is approved.

What Does a Home Warranty Cover?

Major appliances such as water heaters, stoves, and refrigerators are frequently covered under a home warranty plan. It could also comprise HVAC, plumbing, and electrical systems. To understand coverages and exclusions, it is critical to read the fine print of a warranty paperwork. While some warranties include garage door openers as standard coverage, others may require additional fees.

Although it is possible to obtain additional coverage for a home feature that is not covered by basic coverage, it is also feasible that some warranty companies will not cover specific home components. Some home warranty providers, for example, include outdoor pools or spas for an extra fee, but others may not cover a pool as part of their coverage.

Home Insurance vs. Home Warranty

While premiums, deductibles, claims, and responsibilities are similar across house warranties and home insurance plans, they each provide different services. Home warranties ensure that household systems, which can break or wear out, continue to function. Home insurance, on the other hand, protects the structure of the house from damage or loss caused by fire or other natural catastrophes.

When buying a property, the buyer may not be aware of how well the former owners maintained and managed the home's many components. At the time of purchase, information about the age of household equipment or their useful life in years may not be available.

Additionally, the homeowner's hunt for an expert handyman or service provider may be time-consuming. Homebuyers purchase home warranties for a variety of reasons, including a lack of time and the high expenses of paying for damage or replacing several components of the property.

Qualifications for a Home Warranty

For a variety of reasons, home warranty providers may refuse to cover you. If there was known damage before the warranty coverage began, the claim may be denied. As a result, if a pre-purchase house inspection reveals damage to certain systems or appliances, the prospective buyer should request that the seller fix or replace the item before closing the deal. Furthermore, a warranty provider will not cover household components that have been incorrectly maintained, installed, or misused.

A home warranty can be purchased by homebuilders, sellers, and homeowners. Some homebuilders provide policies that cover structural flaws for up to ten years, including problems with flooring, walls, roofs, framing, sheetrock, and other materials. Homebuilder warranties may also cover electrical and plumbing systems for two years, as well as installed household equipment for six months. A homebuilder warranty policy is frequently included in the price of a new home.

In the case of older homes, the seller or agent may pay for the warranty to entice a buyer to buy. Existing-home warranties typically cover a year's worth of household system and appliance repair. The homeowner has the option to renew the contract after a year.

The Price of a Home Warranty

The average cost of a basic home warranty is between $350 and $600 per year. Depending on whatever items are selected, extended coverage can cost anywhere from $100 to $500 extra. The cost of the policy is determined by the homeowner's state of residence and the warranty package purchased.

A cost, known as a "service call fee" or a "trade call fee," is frequently paid to the servicing contractor in addition to the annual premium. An insurance deductible is the same thing as a contractor charge.

The cost might range from $50 to $100. Most plans provide that if the cost of a repair or replacement is less than the fee, the homeowner is responsible for the difference. Each feature or system that is scheduled for maintenance will incur a new service price. If a homeowner's oven and refrigerator are both broken, they will pay two separate trade fees to the contractor.

Finally, if the cost of repair or replacement exceeds the home warranty contract limit, the homeowner is responsible for the difference. Homeowners should research home warranty businesses' services to determine which out-of-pocket costs they would be responsible for in the event of a claim and whether a warranty is worthwhile.