Is there a way to prevent unexpected expenses when an appliance breaks down? What if the refrigerator dies on a hot day and there is no money in the budget to buy a new one? New refrigerators are often more than $1,000 to purchase.There is a way to protect yourself from these expenses, but it is not free. This is why you need a home warranty.
Purchasing a home warranty protects the homeowner from repair and replacement costs when appliances or home systems break down. This warranty lasts for a year at a time, and there is a monthly fee and service charge for calls.
What Is a Home Warranty?
A home warranty is a service contract that will cover the cost of repairs for a variety of home systems and appliances. The home warranty will list the appliances and home systems to be covered. Then, when any of those items breaks down, the warranty company sends out contractors to repair them for a small, specified service fee. When a homeowner learns more about home warranties, they will notice the following benefits:
- A reduction in repair costs for home systems and appliances
- Payment help for new replacement appliances when old ones
- Lower ownership expenses
- Peace of mind about the condition of appliances and home systems
- The ability to budget in advance for appliance repair costs because of the standard monthly fees and service charges for calls
How Does a Home Warranty Work?
When a homeowner purchases a home warranty, they agree to make monthly payments totaling around $300 for the year. They also agree to pay a small service fee of between $75 and $125 each time they call for appliance or home system repairs. The homeowner knows what their appliance and home system costs will be for the year.
In return, the home warranty company has contracts with different independent appliance and systems repair contractors at reduced pricing. Without a home warranty, repairing a broken appliance could cost hundreds of dollars. But, with a home warranty, the repair, if covered, only costs that agreed-upon service fee. Many times, one appliance repair covers the cost of the warranty. And, if a homeowner is lucky enough not to have any appliances break down, the warranty cost is all they have paid.
When an appliance or home system breaks down, the homeowner calls the warranty company, and that company takes care of calling and scheduling a contractor to go to the home and inspect the appliance. The contractor reports back to the warranty company before they begin the repair to see if the repair is covered by the warranty. If the repair is covered, the contractor completes the repair for the small service charge.
What Is Covered and What Are the Limitations Of Home Warranties?
Home warranties cover many appliances and systems, or just a few, depending on the specific warranty. Homeowners can take a standard home warranty and add specific appliances or home systems to it for an additional cost. Common appliances covered include:
- Clothes washers and dryers
- Ovens, ranges, and stoves
- Built-in microwaves
- Garage door openers
Home systems included often include:
- Heating and air conditioning systems
- Central vacuum systems
- Water heaters
Homeowners should purchase a home warranty that covers the appliances they actually have. So, read the various warranty choices carefully and choose the one that closely aligns with your coverage needs. Then, add appliances or systems, not on the plan. Ask about the additional cost for each appliance to see if it is worth adding them.
The home warranty has limitations homeowners must read and be familiar with. They include:
- Pre-existing conditions
- Problems caused by the improper installation of appliances or home systems
- Lack of maintenance or abuse
- Misuse of the appliances or using them for purposes other than home use or what they are intended for
- Cosmetic damages such as dents and scratches that don’t affect the appliance’s operation
- Appliances not listed on the warranty
- Damages covered by homeowner’s insurance
It is important to read the home warranty carefully before signing to learn the plan limitations and decide if they are reasonable. Then, check the coverage before calling for service because, if the repair contractor comes out, there is a service fee even if the repair is not approved by the warranty provider.
Do You Need Both Homeowner’s Insurance and a Home Warranty?
Remember, homeowner’s insurance is required for homeowners with mortgages. It covers the home structure and belongings damaged by events like fires, frozen pipes, storm damage, burglaries, or vandalism. Homeowner’s insurance does not cover systems or appliances that break down with normal use.
A home warranty covers appliances and home systems that break down due to age and normal use. It will cover things that homeowner’s insurance will not cover. To be fully protected, a homeowner needs both homeowner’s insurance and a home warranty.
Who Benefits Most From a Home Warranty?
It is not easy to decide if a home warranty will benefit a specific homeowner. But, in general, the homeowners who benefit the most from home warranties are the ones that are not handy or do not have time to repair appliances. Homeowners who may not be able to find an appliance repair person, electrician, or plumber every time there is a problem also benefit from a home warranty.
If a homeowner wants to budget for a year’s worth of home expenses, a home warranty will be beneficial because the costs are stated in the contract. A person who is a first-time homeowner with little knowledge of home maintenance and appliance repairs should consider a home warranty. A person buying an older home with older appliances should also consider a home warranty.
People in homes with older appliances and systems who are handicapped, older with mobility problems, or with demanding jobs benefit from the convenience of home warranties. One call brings help to deal with appliance or home system repairs or replacements.
Some Realtors and home sellers offer home warranties as part of the home sale. Everyone should accept a free home warranty. It is up to each home buyer to determine whether they will benefit from a home warranty. Review the coverage carefully and ask for changes to better suit the home’s needs and get the most from a home warranty.