It’s a great feeling to finally lock down a house you love after all the house-hunting labor. But houses won’t always stay perfect. They get old, and things start to break. A house warranty will pull you through many home repairs and replacements to come over the years. This is why it’s important to know what you’re getting before buying a home warranty.
Do You Need a Home Warranty?
A home warranty is a policy that homeowners purchase to cover the costs of hefty repairs and replacements in case their home appliances or systems breakdowns. It offers you financial protection against unforeseen home defects.
You’ll be presented with many home warranty options when you buy a new or used house. But all of these choices might make you wonder if you really need a home warranty or if it is just another unnecessary expense.
There are limits to every home warranty and you need to consider the condition and age of your home systems and appliances to determine if you need one. The best approach is to take an inventory of your house. List all the major appliances and systems you have, their ages, and then consider their chances of failure.
Then write down the estimated costs of repairs or replacements. If most of your home systems and appliances are new and under the manufacturer’s warranty or you’re purchasing a new home altogether, there’s probably no need for a home warranty.
We recommend getting a home warranty if:
- You own, or are purchasing, an older home
- You want to reduce your repair and maintenance expenses for home systems and appliances
- You’re moving to a new area where you don’t know any trusted local repair technicians
- You’re a first-time homebuyer who wishes to protect all home appliances and systems
- You plan to sell the house in the future and want to entice potential buyers
If you’re still on the edge, here are some pros and cons of getting a home warranty that’ll help you decide if it’ll be beneficial for you in the long run:
Pros
- Peace of mind, especially for first-time buyers, that their appliances and systems are protected
- Less repair or replacement costs
- No more failed DIY experiments
- Overall, relatively inexpensive
- Ease and convenience – eliminates the hassle of finding a worthy technician every time an appliance or system gives up. Home warranty companies have their own affiliated and trusted professionals.
Cons
- You may never use it
- Does not cover items that are not maintained properly. Your claim can be denied and you might be required to show proof of maintenance by the warranty provider.
- The cancellation and renewal clauses are sometimes quite complicated.
- A home warranty may not cover expensive repairs
- You won’t be able to pick a contractor of your choice.
- There’s a service call fee, ranging from $50-$70.
- Most companies have maximum home warranty coverage limits for the year.
Things to Consider When Buying a Home Warranty
Here are a few things you need to know and ask yourself about before you buy a home warranty plan:
Your Coverage Needs and Warranty Coverage
Your coverage needs should align with the home warranty coverage offered by the company. You can choose a plan that covers only a specific appliance or one that covers all appliances and systems of the house. Generally, people who choose a home warranty for a specific appliance do it if the appliance is quite expensive or very old (and they wish to offset the cost of replacing it).
After you have a clear understanding of your coverage requirements, you can begin searching for reputable home warranty companies in your area. Browse through their plan offerings online and aim for a plan that covers just enough or maybe more than the coverage you need.
Look for warranties with a “repair or replace” policy, which essentially means that if the system or appliance is broken beyond repair, it will be replaced under the warranty. This is an important consideration if your home has more old appliances and systems than new ones.
Some home warranties come with an “obsolete parts” clause that says the company won’t repair a system or appliance if a required part is too hard to find. Some home warranty providers also organize their coverage plans based on the type of item while other plans are based on the number of covered items.
Another thing that you should think about when searching for the right home warranty is if you plan to sell the house in the future. A real estate agent can tell you whether a home warranty adds value to the home if you plan to do so.
Read the Fine Print
There’s a lot of information packed in your service contract or the fine print. And there’s a lot of fine print involved, too. Take your time and carefully read the home warranty contract from all the service providers you’re considering.
The fine print will tell you what the home warranty plan does and does not cover. For example, swimming pools and related equipment are not covered by most warranty plans and require an add-on. Heating systems, air conditioning, plumbing systems, kitchen appliances, etc., are covered by almost all home warranty companies.
Here’s a checklist for everything that you must note from the fine print:
- The amount of the service fee. It should be under $100 per visit.
- Whether it gives you a choice to pick monthly or annual payments. If you’re aiming to pay monthly, check whether the warranty is set up for automatic renewals.
- Exact coverage limits and exclusions.
- Any other terms and conditions.
- Details and process of cancellation.
Customer Service
Customer service is an important, yet often overlooked, consideration. You’ll want a helpful and responsible customer service team to guide you and help you get a broken item or system fixed.
Look for a company that offers 24/7 customer service. The best home warranty companies come with online portals or apps where you can easily file a claim and get quick action. Take a look at Yelp or Google Reviews regarding customer service of the company and you’ll surely get to know how the company deals with the public.
Company Reviews and Ratings
Just like customer service, a company’s reputation is also crucial. Keep an eye out for all reviews and ratings from existing or previous customers to get a good idea of what it’s like to commit to the company.
If you’re a home buyer, you can ask for suggestions from your real estate agent or mortgage lender regarding the company you’re considering. Choose a company that has at least a B rating from the Better Business Bureau or BBB and has good things written about them from third-party customers.
Claim Fulfillment
Home warranty companies generally impose a waiting period of 30 days after you make the purchase. You can only file a claim or request a service visit after this period ends.
Most home warranty companies will assign a qualified contractor within 2-5 business days of your claim submission. Make sure that the company has an emergency claim service that can dispatch a professional within 24 hours.
Limits and Exclusions
Every warranty company has some level of exclusions and limitations on its home warranty coverage.
Exclusions are listed in terms of specific items, parts, or situations that the home warranty company will not cover under the service contract. For instance, it could say that the company will not be responsible for any damage caused by snow, fire, or other natural disasters. Or, it could say the company will only cover mechanical defects.
Limitations are monetary, meaning that if a covered item’s repair or replacement exceeds a threshold, the home warranty company won’t pay for the additional cost. It will pay a specific limit to repair or replace the appliance or system and any excess cost will become the homeowner’s expense.
Knowing these limits and exclusions will help you determine which company will work the best for your home situation.
Price
Home warranty policies usually have two kinds of fees:
- A service call fee
- A monthly or yearly premium
The overall cost of a home warranty will depend on the plan you select, the additional coverage, and the area where you reside. The cost of a one-year warranty plan, on average, ranges from $250-$600. It could either be an annual or monthly payment.
And if you’re choosing comprehensive coverage, you may expect it to be around $400 to $1000. Service call fees usually range from as low as $50 to as high as $120 every time a contractor visits your property for a home inspection and diagnosis. Make sure they align with your budget and you’re aware of all the costs and cuts being made so there are no surprises later.
A low yearly premium usually means less coverage or a high service call fee and vice versa. Make sure you compare the coverage options, evaluate your budget, and try to look at the whole picture before buying.
Company’s Contractors
Make sure you inquire about the qualifications of the contractors the home warranty company has. These companies do not employ contractors; they partner with several local service providers or businesses in the state they service.
Once you file a claim, the home warranty company sends them service calls, and the contractors get to your home to fix the problem. Here’s what you need to ask before you sign a contract with a warranty company:
- Does the home warranty company vet their contractors?
- Are contractors licensed, insured, and bonded in the state where they work?
- What’s the action or procedure against contractors who fail to perform at a certain standard?
- Does the company allow you to choose a licensed independent contractor if they’re unable to locate one in your area?
Mistakes To Avoid
Some avoidable, yet very common, mistakes homeowners make while buying home warranties include:
- Assuming that every part of a certain appliance is covered under the warranty
- Not reading the fine print completely
- Confusing home warranty with a homeowners insurance policy and expecting coverage for your entire house or in case of damage due to perils like fire, hail, vandalism, or theft.
- Overlooking the charge limits
- Getting a home warranty for new construction with all new home appliances and systems that are still under the manufacturer’s warranty
- Expecting that the home warranty covers damage due to poor maintenance. For instance, if your HVAC stops working because you didn’t change the air filters or forgot to flush sediments from your water heater, your warranty provider won’t pay for such damages.
- Not understanding that a home warranty company can deny a claim if you’re asking for repair or replacement for damage caused by pre-existing conditions, improper installation, unusual wear, and tear, code violations, etc.
Frequently Asked Questions About Home Warranties
No, you will be given a waiting period of about 10-30 days after purchasing the home warranty. Once that period ends, you may use the home warranty plan at any time.
Yes, you can get a home warranty for pre-owned or older homes. In fact, it is recommended to invest in a home warranty for such homes since there are more chances of encountering unknown defects. A home warranty will help you reduce your maintenance expenses.
Yes, you may get a warranty offered by the home seller that you can purchase and continue to use. It’s a great option if you don’t want to opt for a buyer-specific warranty.
A builder’s warranty is useful if you’re purchasing a newly constructed home. It will cover major structural components against physical damage.
Now that you know all the do’s and don’ts about buying a home warranty, you’re equipped to make the right choice that best suits your budget and lifestyle. And if you need assistance at any step, our pros are here to help.
Main Image Credit: Jean van der Meulen / Pexels
