What a Home Warranty Policy Can Offer Homeowners and Landlords
Let's say that you just purchased your dream house or moved into the perfect rental along with the elegant décor that turns your house into your home. It has been a few months and everything is unpacked and placed in its designated spot. However, within a few months of moving in, you get hit with a costly and unexpected expense when your heater blows out during the winter.
With a new mortgage payment and a limited amount in savings, you're looking at numerous financial options on how to pay for this unexpected expense. Had you purchased a home warranty plan, this expense - as well as any major systems and appliances that may need repair or replacement in your home - would have been covered.
What Types of Home Warranty Plans are Available?
Home warranty plans are usually broken down into appliance plans and systems plans. Some will simply be called Appliance and Systems plans, while others may have names such as Gold, Platinum, etc, though you’ll be able to tell which is which. Most home warranty companies offer a Combination, or Total, plan that combines appliances and systems.
What Does a Home Warranty Include?
Home warranties typically include coverage the following major appliances and systems:
- Central air conditioning systems
- Central heating systems
- Humidifiers
- Interior electrical systems
- Refrigerators
- Ranges, ovens, and cooktops
- Dishwashers
- Built-in microwaves
- Water heaters
- Plumbing systems
- Garbage disposals
- Washers and dryers
- Garage door openers
- Roof leaks
When Do You Need a Home Warranty?
Home warranties are offered to all homeowners, both new and existing. Typically, home warranty plans are offered to the home-buyer when they are purchasing a new home. However, if the buyer decides not to purchase home warranty insurance simultaneously with their home purchase, then they can secure a home protection plan at a later date. There is no time restriction as to when a homeowner can decide to purchase a warranty plan.
Cost Involved with a Home Warranty Plan
Typical home warranty plans cost anywhere between $350-500 per year, or $45-60 per month, which can be paid in a lump sum amount during the purchase of a new home. This lump sum payment would be collected at the time closing costs are due for the newly purchased home. However, the seller, real estate agent or a family member or friend can purchase home warranties on behalf of a home-buyer. If a home appliance insurance claim is filed then the homeowner may be responsible for paying a service fee or deductible that typically ranges from $50 to $125. Please note, home warranty companies have different contract agreements, therefore fee amounts may vary.
What is the Coverage Term for Home Warranties?
While coverage varies depending on the home warranty company and the policy definitions, it is important to understand that these policies are more like home service contracts that cover repair and replacement of appliances, equipment and other home features should problems occur within the period of coverage.
Home Warranty vs. Homeowners Insurance
A home warranty is not the same as homeowners insurance. For buyers who finance their homes through any lending program, homeowners insurance is a year-to-year requirement. Home warranty provides very specific coverage for select appliances, equipment and other components over a fixed duration of time defined by the terms of the policy. Home warranty coverage may be extended, and warranty companies, such as Choice Home Warranty, normally send courtesy reminders to homeowners before the end date of the policy.
Home Warranties for New Construction
Builders may provide home warranties to buyers of newly-built homes. This type of home warranty may include coverage for some structural elements such as siding and stucco. At least for the first year of coverage, most warranties for new construction would cover the cost of labor and materials on features such as doors, trim and paint. Components of the heating, ventilation and air conditioning system as well as the plumbing network may be covered for at least one year, as with Select Home Warranty. Some builders may extend home warranty coverage up to 10 years for major structural defects in new construction homes.
Home Warranties for Resale Homes
With a resale house, the home seller may provide a home warranty as part of an incentive package to reassure the buyer that repairs and replacement of existing appliances and equipment included in the home will be covered. The duration of coverage can run from one month to one year from the date of closing. Depending on how the policy is written, the coverage may be staggered based on the appliance or equipment in question. For instance, home warranty coverage for a washer and dryer set may be good for the first 3 months only, but the water heater may be covered for a year. Companies such as AFC cover on a yearly basis.
Homeowners may also opt to purchase a home warranty policy from a third party provider as additional coverage. Buyers who are financing the home purchase through loans from the Department of Veteran Affairs may be asked for add-on contracts that may be provided by the builder.
Coverage terms vary between home warranty companies, which is why it’s crucial that you know how long you’re covered for before signing on the dotted line.
Home Warranty Process
Filing a claim is a simple process. Prior to filing, review your insurance contract to verify the item that you need to repair or replace is covered under your plan. Next, complete the following steps:
Contact your home warranty company to file a claim
- The warranty company will review their home warranty plans to verify that you have a plan that covers the item in question
- The warranty company will schedule an appointment for you with a local contractor
- The contractor will diagnose the situation and makes a recommendation to repair or replace the item in question
- Repairs and replacements will be carried out
- You pay a cost in the form of a service fee to the warranty company
- Done
How to Choose the Best Home Warranty Plan for You
As there are many providers to choose from that have a variety of plan options, the best home warranty companies depend on how they can meet the needs of your home. The best way to select the right home protection plan for you is by doing your research on what each company has to offer.
Want to learn more before choosing? These in-depth reviews are packed full of information on the top home warranty providers. Once you've selected the plan that best fits your needs, you'll join the many homeowners that have peace of mind because they are protected by one of the top home warranty companies.
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