Homeowners insurance covers major threats like fire and hail. But a home warranty provides extra security for everyday hiccups like appliance breakdowns and malfunctions in plumbing or electrical systems.
As an insurance producer and renovation specialist, I want to help you understand how home warranties work to protect your home and budget effectively. Let's figure out if a home warranty is the right fit for you.
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What Is a Home Warranty?
A home warranty is a service contract you purchase to safeguard your finances from unforeseen, costly repairs on your appliances and systems. When a covered item breaks down, you simply notify the warranty company, and its reps dispatch a qualified technician to diagnose and fix the problem.
Based on the contract terms, the provider covers any repair or replacement costs after you pay a small service fee per claim.
What Does a Typical Home Warranty Cover?
While coverage varies by plan and provider, most home warranties include protection for the following major home appliances and systems:
Kitchen appliances: Microwave, oven/stove, refrigerator, dishwasher.
HVAC systems: Air conditioning, heating, ventilation/ductwork.
Plumbing system: Pipes, faucets, toilets, water heaters.
Electrical system: Circuit breakers, outlets, wiring.
Other items: Roof leaks, garage door openers, ceiling fans.
Why Should You Buy a Home Warranty?
Home maintenance is not cheap, and tight budgets are forcing 42% of American homeowners and renters to delay repairs due to inflation. But a home warranty provides peace of mind. Here's why:
Protects Essential Operating Systems and Appliances
A functional home relies on essential appliances and systems like refrigerators, dishwashers, and HVAC units. A home warranty offers affordable protection when these vital components unexpectedly malfunction so you can avoid expensive repair or replacement costs.
Provides Financial Safety Net
Homeowners typically spend around $6,000 on maintenance and repairs annually, so a warranty can be a wise investment. With a plan in place, you have a safety net that protects you from being blindsided by potentially bankrupting home repair bills that could otherwise wreak havoc on your budget and savings.
Convenience and Peace of Mind
When a covered item breaks down, most reputable home warranty companies make the claims process extremely convenient. They provide a single point of contact to dispatch approved, pre-screened service technicians to your home. This saves you the hassle of vetting contractors and scheduling service calls.
Transferability Can Increase Your Home's Resale Value
You can transfer your warranty to the new homeowner when you sell your house. This makes buyers more confident, as they know any major repairs are covered. This added reassurance can give you an edge over other listings. The ability to transfer most home warranties can also make your home more attractive and potentially increase its selling price.
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How Much Do Home Warranties Typically Cost?
An average home warranty premium totals around $600 per year. Lower-tier policies with basic coverage may cost between $250-$350 annually.
On the other hand, more comprehensive combination plans—which include most major appliances and systems—could range from $500 to $800+ per year, depending on your location, optional add-ons, and more.
The different types of home warranty plans available include:
Systems plans—which only cover a home's major operating systems like electrical, plumbing, HVAC, etc.
Appliance plans—which mainly protect major appliances like refrigerators, ovens, washers/dryers, etc.
Combination plans—which offer comprehensive coverage for both systems and appliances under a single contract.
Structural home warranties—which provide more specialized protection for a house's structural components like the roof, foundation, etc.
In addition to the annual or monthly premium, you'll also have to pay a service fee for each claim you file, which typically runs anywhere from $60-$125 per incident.
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What Is Usually Excluded From a Home Warranty Plan?
Home warranties generally exclude preexisting conditions, cosmetic defects, damage from natural disasters like floods or earthquakes, and problems caused by improperly installed or poorly maintained equipment/systems.
These plans also typically don't cover non-essential household components like garage doors, doorbells, security alarms, etc. To avoid surprises, thoroughly review the sample contract and read the fine print on terms, conditions, limitations, and exclusions for any home warranty policy you're considering.
Potential Downsides of Home Warranties
While home warranties provide many valuable benefits, there are also some potential drawbacks:
Costs: Even basic home warranty plans require you to pay annual premiums and service fees that can add up over time.
Coverage limitations: All contracts have exclusions on certain repairs, issues caused by lack of maintenance, unusual wear, etc.
Service quality variations: Some home warranty companies have stricter quality controls than others when approving service providers.
Less authority over repairs: With most home warranty providers, you can't hire and manage contractors yourself.
How to Choose the Best Home Warranty
When choosing a home warranty, there are several important factors to consider, such as:
Available Coverage Options
Assess the specific coverage options provided. For instance, let's say your refrigerator breaks down. If your home warranty covers refrigerators, you can simply submit a claim, and a technician will come to fix or replace yours at little or no cost to you. But if your warranty coverage doesn't include the fridge, you'll have to pay for this yourself.
Contract Terms and Conditions
Reading and understanding your home warranty contract is crucial. It clarifies what's covered, excluded, and how claims work. Let's say your AC breaks down during a heat wave, but you're not familiar with the specific terms of your contract. In this situation, you would need to review your contract to understand how to properly file a claim.
If covered, you contact your warranty provider, and it'll handle the next stages, like sending a technician. If you skip this step, you may not follow the correct procedure, potentially leading to delays or denial of your claim.
Provider Reputation & Reviews
Check the home warranty company's reputation for satisfactory customer service and fast claims processing. If your dishwasher breaks, you don't want water all over due to slow response times. A reliable company will send a qualified technician quickly to fix the problem and always prioritize customer satisfaction and reliable service.
Additional Considerations
Service fee costs: Compare the required service fees across providers to find the most affordable option.
Claim process: Understand the specific steps for requesting service and approving claims. Look for providers that make it easy.
Additional services: Some home warranty companies supply valuable add-ons like credit monitoring, moving services, pest control, etc.
Pricing and plan costs: Look for the overall best value by comparing premium costs vs. coverage amounts.
Local technician network: Having a larger network of approved service providers in your area is ideal for faster service.
Provider financial stability: Make sure the company has a solid financial standing to fulfill claims.
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Find Your Perfect Home Warranty Match
A home warranty can be a worthwhile investment that offers you peace of mind and convenience when something breaks down. Just be sure to do your research when comparing policies to find the coverage and home warranty partner that best fits your requirements.
Our quiz simplifies your search. We created a matching tool where you can get matched with a recommended provider based on your needs. You’ll receive an instant, no-obligation quote from your recommended provider!
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