A home warranty is a residential service contract that covers the cost of maintaining household systems or appliances for a set period. A home warranty is different from homeowners’ insurance and a structural warranty, which is specifically used by home builders and buyers and not for existing homes.
Key Takeaways
- A home warranty is a service contract that covers the cost of maintaining household systems or appliances for a set period.
- Home warranties are most often advised when purchasing an older home for which information is not readily available on the items.
- These warranties are different from homeowners’ insurance, which covers losses like fire or other disasters.
- Home warranty coverage can cost between $432 to $816 a year, with a $36 to $68 fee for each item serviced.
How a Home Warranty Works
When an appliance or system is damaged, the homeowner contacts the home warranty provider, which usually collaborates with various home service providers like plumbing or electrical contractors. After a claim is notified, the warranty company requests one of its partners to assess the damage and report back.
What Home Warranties Cover
The assessment report will reveal the extent and causes of damage to the appliance. If covered, the home warranty company will employ the contractor to repair or replace the system. Home warranty plans usually cover major appliances like water heaters, stoves, and refrigerators, as well as systems such as HVAC, plumbing, and electrical systems. There are often additional premiums for items such as garage door openers or pools. Note that each service request usually incurs a fee between $55 to $150.
Home Warranty vs. Home Insurance
While a home warranty is similar to home insurance policies regarding premiums, deductibles, claims, and liabilities, these two services offer different coverages. Home warranties maintain household systems which could break down or wear out, while home insurance covers damage or loss of the home itself from events like fire and certain natural disasters.
When purchasing a home, buyers may not know the maintenance history of household components. Hence, a home warranty can provide peace of mind by saving time and lowering out-of-pocket expenses for repairs or replacements.
Home Warranty Qualifications
Home warranty providers might deny coverage for several reasons, including pre-existing damage before the start of coverage or poorly maintained, improperly installed, or misused household components. Buyers should ask for such items to be repaired or replaced by the seller before finalizing the purchase. Homebuilders, sellers, and homeowners can all purchase a home warranty. Homebuilder warranties may cover essential household systems like electrical and plumbing for up to ten years. Sellers might offer a home warranty to incentivize buyers, especially for older homes.
Home Warranty Costs
The average cost for basic coverage ranges between $432 to $816 annually. In addition to this, service contractors charge a fee for each visit, typically ranging from $55 to $150. Homeowners should evaluate different companies to understand the potential out-of-pocket expenses in the event of a claim.
Is a Home Warranty for My Home?
A home warranty isn’t insurance for your house itself but covers appliances and household systems within your home. Newer homes may not benefit as significantly as older ones, wherein appliances are dated and more predisposed to failure.
Do I Have to Buy a Warranty for My Home?
No, home warranties are not compulsory. However, if you purchase an older home with older appliances, it might be wise to consider a home warranty policy or plan replacements.
What Is a Residential Service Contract?
A residential service contract, also known as a home warranty, protects household systems and appliances during the period of warranty coverage.
Related Terms: homeowners insurance, structural warranty, residential service contract.
References
- Consumer Affairs. “Home warranty costs Expect to pay around $60 per month for comprehensive coverage”.
- Consumer Affairs. “Home warranty costs Expect to pay around $60 per month for comprehensive coverage”.
