Your home is your castle, and you probably want it to last for decades to come. Over time, houses and appliances wear down and sometimes break or need to be replaced. Some appliances like microwaves are affordable and easy to upgrade. However, HVAC systems, internal plumbing, and water heaters can be expensive and time-consuming repairs.
Thankfully home warranties can soften the financial impact of home repair and enable you to keep your house in pristine condition throughout the years.
Today we will discuss how home warranties work and what you can do to prepare and get one that fits your budget.
What is a Home Warranty?
Home warranties are service contracts between a homeowner and a warranty provider. In exchange for a specified payment, the warranty provider will pay for the cost of repairs and materials for all covered appliances, excluding a service fee.
Most warranty providers do not employ their own technicians; instead, they outsource their network of service professionals across different locales where they operate. For example, if one warranty provider services ten different states, they will most likely have smaller networks of approved subcontractors for the various geographic areas within their coverage areas.
When a customer files a claim with the warranty company, they will send one of their approved service providers to assess the repair, provide a quote, and ultimately perform the repair. The customer will generally be liable for a service charge ranging from $50-$100, and the warranty company will pay the rest of the bill, including labor and materials.
Home warranties are different from homeowners insurance policies because the warranty is designed to pay for home repairs incurred by normal wear and tear. On the other hand, homeowner’s insurance is made to protect the homeowner’s assets from liability damages. For example, if your dog bites a guest, you may be liable for medical bills and legal expenses. A homeowner’s insurance policy would pay for the damages and protect the rest of your assets.
However, if your water heater died, a home warranty would cover the repair and replacement costs without you having to file a claim with your homeowner’s insurance policy.
Does a Home Warranty Fit Your Needs?
There are plenty of benefits associated with home warranties, but it’s important to outline the pros and cons depending on your needs and lifestyle.
Home warranties come in many shapes and sizes, which all have different coverage limits and associated costs. Many standard home warranties cover heating, plumbing, and electrical repairs, but other appliances such as air conditioning and external plumbing may require a more robust home warranty.
As you shop for a new home warranty, take an inventory of your appliances and factor your home’s age into the quote. Newer homes may already be under warranty, or newer HVAC systems may have coverage for five to ten more years. Once you are aware of how much coverage you have vs. how much you need, finding the optimal warranty will be much easier.
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Important Considerations
After you identify the optimal coverage amount, it’s time to start looking at your options. Although there are many standard practices among the major warranty companies, there are nuances like waiting periods and exclusions to be on the lookout for.
- Waiting Periods
You may be familiar with a waiting period within an insurance policy such as a life insurance or pet insurance policy. Waiting periods dictate a minimum time between the beginning of coverage and when you are eligible to make a claim on the policy.
These waiting periods help protect insurance providers from paying for treatment for pre-existing conditions because otherwise, they would go out of business. Warranty companies may have similar waiting periods before approving claims for expensive repairs.
For example, some consumers may be tempted to purchase a warranty on an HVAC system that is already broken. Waiting periods and inspections will prevent the warranty company from paying for this and protect them from many fraudulent claims.
Once the waiting period ends, then the customer will be able to enjoy the full benefits provided by the warranty.
- Exclusions
Some brands of appliances are known for poor reliability and are prone to break. Some warranty providers may have a list of excluded brands or items that they will not pay to repair. Although many appliances are made to heightened manufacturing standards, reading the fine print for a new warranty contract can help ensure you are getting the coverage you need for your home.
- Age
Brand new plumbing and appliances are often much cheaper to insure or purchase a warranty for because they usually have a long lifespan ahead of them. Older homes with worn-down AC units or broken roof tiles will demand a higher warranty price because there is a higher probability that the warranty company will need to pay out a large sum sooner rather than later.
If you have an older home, you may want to create an estimate comparing the cost of replacing your current appliances vs. the price of a warranty based on their current condition. You may find it is cheaper to replace them now than to pay a higher warranty price for years to come.
- Coverage
Coverage limits and service requirements are other key components of researching a new home warranty. You may find that some providers will replace appliances up to a certain dollar
amount, or they will replace them up to the current market value of a comparable product.
Choosing the Right Warranty
Although there are plenty of considerations when purchasing a home warranty, the extra detail and research will pay off in the long run when you find that sweet spot between price and value. By going the extra mile and finding a warranty that fits your needs and budget will help provide an extra sense of protection without draining your budget.
Final Thoughts
Hopefully, you can see how powerful a home warranty can be, and now you are more prepared than ever to shop for a warranty that works for your home. If you want to learn more about home warranties, be sure to check out our other guides; once you are ready to start shopping, head over to our reviews, where we compare some of the leading warranty providers on the market!