Home warranties are often confused with homeowner’s insurance, but they are two different programs. A home warranty covers all of the specifics of your home, including your appliances and systems. Homeowner’s insurance covers damage done to your home in the event of a natural disaster or other unexpected events, like a fire. Your homeowner’s insurance will cover you in case you are flooded, but it will not cover that dryer that is floating in the front yard. Many agencies allow you to customize your coverage to include additional items such as a pool or a well pump.
Not all home warranty policies are the same. They can vary from one agency to the next, and as such the prices also vary. It is prudent to take the time to educate yourself about the services typically offered and what the average price is. This can give you a good place to start your search. A list of typical questions and services to ask for are included below to help you make your choice.
How to Evaluate a Home Warranty
In theory, a home warranty sounds like a great idea. If you choose a good one, it can be. However, dive right in without asking the right questions and you may face denials on claims you thought were covered. Make sure the warranty you are considering will actually cover what you want it to cover. In general, most policies will not cover your windows or the structure of the home. If your home is older or you have lived in the home for awhile, a home warranty may be a good idea for you. However, new homeowners may still be covered under their builder’s warranty or the manufacturer’s warranty.
Home Warranty
Questions to Ask Yourself about Home Warranty Coverage
Are you already covered? Make sure you actually would benefit from a home warranty. In many cases you would, but if your appliances are newer keep in mind they may still be covered by the manufacturer. Wait until that ends, then consider the home warranty. Also, many credit cards extend warranties on appliances purchased using that card. Some may add an additional two years’ coverage on items you have purchased. Make sure to check with your credit card company if you used their card to buy your appliance.
What is this going to cost you? The amount you pay for a policy can vary depending on many factors, including what you want covered, where you live, and how large your home is. Some companies offer packages that just cover your plumbing, or wiring. Others offer a more comprehensive package. Most offer three types of warranties. Those warranties cover just one appliance, or all your appliances, or everything including your plumbing and electrical. An average policy costs between $480-$1000 a year. Some companies tag on extra costs as well when you need to have something repaired. You may be required to pay a copay, just as you would with health insurance. That can run you between $60-$130.
Read the fine print. Many policies have exceptions written into them. Some will cover your refrigerator, but this will not extend to the ice maker IN the refrigerator. Others cover the hot water heater, but not the water tank its in. Other exceptions may include such things as denial of coverage for an oven that is damaged by a power surge. Did you keep up with regular routine maintenance? If not, your claim can be denied. It pays to take the time to read the proposed policy from beginning to end, highlight parts you do not understand. For example, does the policy cover the repair of a broken appliance, or will it replace the appliance? Does the warranty cover the replacement cost of the appliance at current market value? If not, you will be paying the difference out of pocket for a new appliance.
Is there a cap on this plan? Some home warranties place a cap on how much a plan can pay out within a certain period of time. At least two of the major home warranty companies pay only $2,000 toward replacement, repair or diagnosis of an item in your home.
Benefits to a Home Warranty
There are many reasons to purchase a home warranty. One of the greatest benefits is that it protects your finances from an unexpected and costly repair bill. In general, home warranty companies have contracts with local repair companies, so you save the time and trouble trying to find someone. When a covered item stops working all you do is call the home warranty company and they arrange to send someone out. There is no charge for the repair person to come out and you can file service requests online with most companies. For many these time and money saving benefits far outweigh any of the problems. Good home warranties exist and if you take your time to ask the right questions then you and your home’s contents are protected.