What’s Covered By a Typical Home Warranty

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October 2, 2020

Buying a home is one of the biggest financial decisions most people make in their life, but the process has many unexpected costs. You’re probably already familiar with homeowners insurance, but most plans only cover catastrophic events. This means you could still wind up paying a small fortune for repairs on your new home. Home warranties are a relatively inexpensive way to ensure you don’t encounter any nasty—and expensive—surprises down the road.

What is a home warranty?
The difference between a home warranty and home insurance
What does a home warranty cover?
Why you should consider getting a home warranty
When should I get a home warranty?
How much should I pay for my home warranty?
6 Things to watch out for when purchasing a home warranty

What is a home warranty?

You’re probably already familiar with other kinds of warranties—ones that come with a computer or other electronics, for example. A home warranty serves as a blanket warranty for all the appliances and systems in your new home. They’re basically like any other warranty, but on a larger scale and last for a longer period of time. The warranty usually covers repairs and replacement of old appliances and home systems, like HVAC.

Home warranties are never one-size-fits-all. The scope of coverage will depend on how old your building is, the age of your plumbing and electrical systems, and the number of appliances included with the home. Homeowners with an older house will likely want to include all of their appliances. However, buyers for new homes might be able to exclude brand new appliances and opt for a cheaper warranty. The point of getting a home protection plan is to cover home repairs when needed, and not all homeowner’s warranties cover the same things.

The difference between a home warranty and home insurance

Some people confuse home insurance with a home warranty, but they cover different things. Home warranties protect your appliances, heating systems, and plumbing fixtures from damage caused by normal wear and tear. Homeowners insurance protects your entire home from damages incurred by natural disasters or fire, and are very specific in the types of events that can trigger insurance coverage. In other words, homeowners insurance will help you replace a burned down garage but is pretty useless when it comes to upgrading your dishwasher. 

What does a home warranty cover?

Coverage can vary between properties. However, most standard home warranty programs will cover your basic appliances and systems such as:

  • Dishwashers
  • Refrigerators
  • Stoves
  • Washer and dryers
  • Water heaters
  • Electrical wiring
  • Plumbing

You can often expand your coverage to include other items, such as:

  • Sprinkler systems
  • Pools
  • Windows and doors
  • Roofs (although expect to pay a premium for this service)

The exact coverage will vary depending on the age of your home and comfort level with fixing and caring for your appliances. Do your due diligence when researching warranty plans, and work with an agent to identify any glaring gaps in coverage.

Why you should consider getting a home warranty?

Homeownership can be expensive. This can come as a harsh surprise for long time renters who spent years romanticizing homeownership, only to find themselves sloshing around a basement at 2:00am trying to fix a leaky water heater. Home warranties provide extra protection, ensuring that you won’t encounter unexpected costs down the road. For example, financing a $6K heating system at a moment’s notice would be impossible for many people. A home warranty can help you repair—or even replace—your heating system at a lower cost.

Chicago and NYC home buyers should be particularly sure their cooling and heating systems are covered. Half of all buildings were built prior to World War II, so many homes may have outdated pipes, ducts, and HVAC systems.  With Chicago’s brutal winters, a faulty heating system isn’t just inconvenient—it’s downright dangerous!

When should you get a home warranty?

You can technically get a home warranty at any time, but it’s a good idea to get one when you first buy the home. Make sure to undergo a thorough home inspection before you pick a warranty. It’s also good to address major issues prior to pulling the trigger on a home purchase. Your options include asking them to complete repairs before closing or requesting a discount to offset the cost of repairs. Once you’ve completed the inspection, it’ll be easier for you to figure out what you need to be covered under a warranty.

If you didn’t get one at the time of purchase, don’t worry!  It’s still a good idea to get a warranty after the fact—although it may be harder to establish baseline conditions for your appliances since you’ve already been using them.  If you currently live in an older home, you may have already noticed your appliances faltering. Since there’s no guarantee for how long an appliance will last, a home warranty can still cover your home systems and appliances when they inevitably fail.

Warranties included with purchase

It’s common to get a home warranty with the house when you buy it. However, that’s not always a given. Be sure to work with your agent on understanding what kind of warranty you’ll be inheriting. Be sure to check that you won’t get charged extra for a warranty that’s about to expire. However, if you’re looking to sell your home anytime soon, a robust home warranty will make your property more attractive to prospective buyers. It would be one less thing they have to worry about when making you an offer.

If you’re buying a newly constructed home, it’s very likely that there’s a builders’ warranty on the house. These warranties are paid for by the builder, and usually cover basics like plumbing and sewage systems. However, they rarely extend to appliances. That said, you might be able to negotiate the appliances into your builders warranty before closing. If you can’t, then you might want to take out a supplemental home warranty just in case.

How much should you pay for your home warranty?

The cost of a home warranty depends on the policy you get and where you live. Standard plans can cost anywhere from $300 to $600 per year. Upgraded plans can add an additional $100 to $500 on top of the basic cost. There are some things you want a second warranty or additional coverage for, like if you own multiple refrigerators or a swimming pool. A standard home warranty will not cover items like that. 

Be sure to shop around to find the best deal. While cost may be a factor, be sure to take the number of items covered and the additional services offered—as well as the home warranty company’s reputation and quality of service—into consideration.

6 things to watch out for when purchasing a home warranty

Home warranties can seem complicated and confusing. Before moving forward with a policy, be sure to consider the following:

  1. Did you arrange a thorough inspection first? Although some providers don’t require it, it’s always good to get an inspection first. This gives you a rundown on the condition of your appliances and gives you something to refer to if any issues arise between you and your provider.
  2. What is covered by the home warranty—and what is not. Make sure you fully understand the language and terminology used in the warranty. Don’t be afraid of asking your agent for help if you’re confused. You don’t want to assume “it’s probably fine” only to find out later that your warranty doesn’t include your faulty heating system.
  3. Understand the caps and limits of your coverage. All warranties have some kind of cap on coverage. They can be monetary—such as only allowing for a certain amount spent per appliance—or causal. For example, many plans will cover an air conditioner breaking from wear and tear, but won’t cover the cost of a new sink because you poured paint down the drain. 
  4. Research trade call fees. If a policy seems too good to be true, read the fine print regarding “trade call fees”. Sometimes a policy will charge up to $75 just for dialing their call center, so make sure you take this into account if you plan on using the warranty anytime soon.
  5. Know your deductibles. As with any other kind of coverage, make sure you understand your deductibles to get a sense of what you could end up spending out-of-pocket. 
  6. Understand who will be making your repairs. Each provider has a list of “go-to” contractors for repairs. See if you can take a look at the list and understand how those choices are made. Even the best coverage won’t mean much if the contractor does subpar work.
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