What Is a Home Warranty and How Can it Be of Use?

Buying a home is one of the biggest steps in anyone’s life, and it doesn’t matter whether it’s your first home or your fifth. It’s always a momentous event that deserves to be treated with the proper care and consideration.

Most homeowners know the importance of getting insurance for their new homes to protect against disasters like storms, fires, and floods. Still, one additional and equally important form of financial security every homeowner should consider is a home warranty.

What Is a Home Warranty?

Most people have heard of warranties for things like cars, gadgets, and appliances, but some are unfamiliar with the term home warranty, so what does it mean?

In simple terms, a home warranty is precisely what you would expect: it’s a warranty for your home. It’s a form of protection that covers your home if things go wrong and repairs are needed.

How Do Home Warranties Work?

If you’re familiar with the concept of warranties or insurance policies, it’s pretty easy to understand how home warranties work. A homeowner will typically pay an annual premium to a warranty company. If any systems or appliances break down, they call the warranty company.

As long as the warranty plan covers the issue, the company will then send out a contractor or repair company to fix the problem. The homeowner will still need to pay a small service fee, but the warranty company covers all repair and replacement costs.

Typically, you can expect the following steps and process for making a claim with your home warranty company:

1. One of your covered systems or appliances breaks down due to normal wear and tear.
2. Call your home warranty provider to file a claim, or you can submit your claim online.
3. Wait for the service request to be processed.
4. A technician or service professional will typically be sent to your home within 48 hours.
5. The service technician will evaluate and make recommendations for repair or replacement.
6. After the evaluation has been complete, you will pay the service fee.
7. If the system or appliance requires an easy fix, the surface technician will likely repair it on the spot. If there needs to be a replacement or the repairs require more equipment, they will schedule a follow-up visit to complete the service request.
8. Once the repair replacement has been completed, you can rest easy knowing that your system or appliance has been fixed.

As you can see, the entire process is relatively straightforward. However, service times may differ if your appliance or system breaks over a holiday weekend or a weekend. While the average time to get a technician out to your home is about 48 hours, this can vary depending on the home warranty company. Before you choose a home warranty provider, make sure you check the fine print and see what their service process looks like.

How Is a Home Warranty Different from Home Insurance?

When people first hear about home warranties, many assume they’re just like home insurance policies. In reality, the two are very different, and it’s essential to understand the distinction to see why both home insurance and home warranties are important.

As you may know, home insurance is designed to cover the structure and major belongings inside from damages due to things like storms, fires, leaks, or criminal activities such as theft and break-ins.

A home warranty is designed to cover the costs of repairs and replacements to the various systems and appliances inside your home, like the electrical wiring, the plumbing, appliances like ovens and fridges, and heating and cooling systems.

Warranties and insurance policies work in similar ways. They both come with deductibles and annual premiums – although warranties tend to be cheaper overall, the critical difference is in terms of what they cover. Remember: insurance is for structural damage and theft, whereas warranties are for system and appliance repairs or replacements.

What Do Home Warranties Cover?

In terms of what is covered by a home warranty, the specifics of each plan can vary. Some cover more than others, and many can be customized to cover whatever you need. A typical plan will cover all repairs and replacements for the following systems and appliances:

• Heating system
• Cooling system
• Electrical system
• Plumbing
• Oven
• Refrigerator
• Washing machine
• Dryer
• Dishwasher
• Built-in microwaves
• Water heaters
• Garbage disposals
• Garage doors

Benefits of a Home Warranty

Home warranties can have numerous benefits. Because you never know what could go wrong with the home, having a home warranty not only gives you peace of mind but can also save you money. Additionally, home warranties could have some of the following benefits:

• Home warranties can save homeowners money and the costly repair and replacement costs of appliances and home systems.
• All repairs and replacements will be done efficiently; the homeowner does not have to be without a crucial system for long.
• Home warranties make finding local professionals easy not to be frustrated if a home system or appliance breaks.
• The home warranty company will work with local experts that are the best in their field.
• Having a home warranty on your home as you try to sell your property can be a great real estate incentive for potential buyers.

Potential Drawbacks of a Home Warranty

As with all major home decisions, you should consider the potential drawbacks of having a home warranty. You should consider the following before you choose a home warranty:

• Home warranties do not cover items that have not been maintained. So if you have not cleaned or maintained a system or appliance, their repairs or replacement may not be covered.
• If you purchase a home where the previous owner did not properly maintain the appliance, the home warranty may not cover it even though you have attempted to maintain it. This is because the damage may still have been due to neglect covered by a home warranty contract.
• Many home warranty companies work with specific contractors and professionals, so you may not get the chance to choose which professional comes into your home to fix your system or appliance.
• Home warranties may not cover everything you need. The more expensive plans will generally cover more, but not everyone wants to pay that price.

How Do You Know if You Need a Home Warranty Plan?

If you consider getting a home warranties plan, it’s important to review the items in your home and decide what you would like covered. For example, if you have an older house and know that your HVAC system will probably need to be replaced in the next few years, you may want to choose a home warranty plan to help with the cost burden.

Generally, your home is one of the biggest purchases you will ever make. So, a home warranty plan may be an excellent investment that will ensure the functioning of your systems and appliances. But before you decide to purchase a home warranties plan, make sure you consider the following as part of your decision.

You Are a First Time Home Buyer

If you are a first-time homebuyer, choosing to buy a home warranty plan may be a great way to save money. For the most part, many first-time homebuyers will purchase a home warranty plan as they close on their first home. Even though they’re spending just a little bit more each month, investing in a home warranty plan that will cover systems and appliances will save you money in the long run.

• Can You Afford a Home Warranty?

Paying a little bit each month can save you a lot of money in the future. Many people who have financial limitations may not feel it’s worth paying a little extra for a home warranty. However, it makes sense to pay for a home warranty if you want to avoid dropping thousands of dollars to fix an appliance or system.

• Consider the Age of Your Home

If you live in an older home or are purchasing an older home, a home warranty plan will be worth it. As appliances and systems get older, the likelihood that they will break down or need repairs becomes much more likely. So, instead of sending thousands when they do break down, spend a little each month for a home warranty plan.

• DIYers Should Still Consider Home Warranties

Even if you are an individual who prefers to do everything yourself, making repairs on electrical, plumbing, appliances, or even HVAC systems requires a considerable amount of training and expertise. While we do not deny that you could probably do it yourself, you should save yourself the headache and the potential risks of doing it yourself.

• Mobile Homes and Tiny Homes

Many home warranty providers do cover mobile homes and tiny homes. So even though you may not think you need it for your smaller property, it may be a good idea to invest in one to save you money in the long run.

• Getting Ready to Sell Your Home

Having a home warranty when you sell your house is a great incentive for potential buyers. Many buyers will see that you have a home warranty and will be more likely to purchase the home because if any of the systems break down within the next year, they can have them repaired or replaced at no cost.

• Rental Property Owners

If you have rental properties, you could lump the cost of the home warranty plan into the total cost of rent for your tenants. That way, you don’t pay the extra money for the home warranty, but can still know that if anything were to happen to that home, the systems and appliances would be covered. It will also benefit your tenants because they know that they can simply call if something breaks.

Why Should I Get a Home Warranty?

So how can a home warranties be of use, and why would you want one? Well, there are many advantages of home warranties for both new and existing homeowners.

For starters, a home warranty can help to save you a lot of money. Average repair bills for issues with heating, cooling, electricity, and appliances can be pretty high, but with a warranty, you won’t need to worry about those costs.

Like a broken oven or burst pipe, just one repair can cost more than the price of your annual warranty premium, so warranties are very cost-efficient in the long run.
What’s more, a home warranty can provide you with some much-needed peace of mind, allowing you to feel more comfortable in your own home, safe in the knowledge that even if something goes wrong, you’ll be protected against financial disasters and difficulties.

Final Thoughts

Now that you understand what a home warranty is and how you can use it, it’s time to start your search. Our experts have reviewed the best home warranty companies around and have crafted detailed guides on these warranties.

*Any opinions, analyses, reviews, or recommendations expressed here are those of the author alone and do not constitute professional or expert advice.