What Exactly Is a Home Warranty and What Does It Do?

A home warranty plan is a type of protective service coverage for a home that can benefit you in many ways. Do not mistake it for home insurance as these policies are quite different. Whereas the insurance mostly covers structural damage to the property, home warranty plans cover appliance and home system repairs. 

A well-chosen home warranty plan can save homeowners from paying huge repair bills on modern appliances. The best thing is that this type of coverage extends far beyond what’s included in the manufacturer’s warranty. Also, you can cover all your major home appliances and systems with a single warranty plan for your home. But bear in mind that not all of these policies are created equal.

There are nearly 200 home warranty companies in the US today, each offering a selection of options. You need to understand exactly what to look for to choose a plan that won’t be a waste of money.

What Does a Home Warranty Plan Cover?

The average cost of home warranty is about $400-600 a year. But the exact costs will depend on your coverage as well as the provider and specific requirements of the state. It’s important to understand that this business is not a well-regulated area. This means that the terms of policies and coverage can differ quite a bit from state to state.

A Typical Home Warranty Could Cover:

• Furnace/heating system
• Plumbing
• Washer and dryer
• AC system
• Ductwork
• Doorbell
• Water heater
• Ceiling fans
• Garbage disposal
• Electrical system
• Oven
• Common kitchen appliances

Bear in mind that kind of thorough coverage only comes in “premium” plans. The majority of “basic” options are, usually, very limited and offer little real value.

There are also specialized plans that are designed for maximum benefit in specific situations. For example, there are policies that exclusively cover home systems or appliances. These types of warranties are a great option for landlords especially when it comes to plans that offer HVAC coverage but it’s important to find the best home warranty companies for HVAC. Once again not all companies are created equal in coverage or customer service.

Best of all, the majority of top home warranty providers offer the so-called “optional coverage.” It allows customizing existing plans to add specific items, ranging from roofing to a spa or pool. This is a great feature that allows homeowners to pick and choose what they actually need covered.

Location Matters

Another thing to understand is that the location matters for home warranty value. For example, Florida is a high-risk state because the local climate speeds up the wear and tear for most appliances and systems. That’s one of the reasons why there are many home warranty operators in Florida. But it’s also the reason why you need to be doubly careful when choosing a provider and plan here. The level of competition is high in this industry and many companies try to gain an advantage by cutting corners.

As a customer, you are the one who would be paying for this in the long run. There have been many home warranty scandals, even with leading providers. Therefore, you should take your time studying and comparing your options.

Who Can Benefit from a Home Warranty Plan?

In theory, everyone who wants to save money on home appliances or system repairs could benefit from home warranty coverage. But unfortunately, it’s not always that simple.

Homeowners who can benefit from these plans the most are the ones who have newer appliances and systems. For owners who have older homes, there is a high probability the claim could be denied. “Pre-existing issue” is one of the most common reasons a claim is denied. In addition, premiums tend to be extremely high for older homes.

Home sellers can benefit from a home warranty plan well! If they currently have a policy in place they may be able to transfer it to the new homeowner. If they don’t have a policy in place they could offer to purchase the new buyer a home warranty at closing. Both options provide the buyer with a warranty, which is a great selling point. 

Not All Plans Are Equal: What Should You Look For?

As it is with all service providers, home warranty companies differ in the levels of honesty and customer service. You should study their reviews by independent professional sources as well as customer testimonials on portals like Google Reviews and Yelp. This will help you understand whether the provider can be trusted.

Red flags to look out for when studying reviews include:

• Frequent claim denials
• Slow to reply
• Slow to send contractors for repair
• Payment delays
• Provider is difficult to contact

The best companies will be accredited with the Better Business Bureau or with appropriate authorities in your state. You should also run a simple Google search to learn some news about the company. This will allow you to see if it was involved in any major scandals.

Once you shortlist the most trustworthy and reliable providers in your area, start comparing plans. The most important things to pay attention to in those are:

• Coverage Terms

  What exactly is covered and in what situations? You also need to study any exceptions carefully so you can understand on what bases your claim might be denied.

• Coverage Limits

  Any home warranty contract would have a maximum coverage limit. You should research the average costs of appliance repairs to see if those limits are enough to cover them.

• Tricky Terms

  It’s common for less honest companies to hide loopholes in the contract fine print. They also often word the coverage terms in a tricky way they later use to get out of paying. You should study the contract carefully to notice any such tricks. Don’t be afraid to ask a qualified expert for advice. And never skip reading the contract before signing.

• Claim Filing Terms

  Be aware that many home warranty companies make it difficult to even file a claim. Check out exactly what you’ll need to do and the time limits you have to do this.

Final Thoughts

Home warranty policies can be a great help to homeowners but only if you use the best home warranty company. Otherwise, you could be throwing your money away, not to mention a lot of time. So it’s important to do your research upfront, make sure to read reviews, and compare policies from different companies.

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About the Author

Top Wellington Realtor, Michelle Gibson, wrote: “What Exactly Is a Home Warranty and What Does It Do?”

Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.

Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres, and more.