Assume that a week after moving into a new house, you switch on the air conditioning and it does not work, this may be big trouble for some people. In this situation, a house warranty may reduce some of the situational stress faced by new homeowners. Despite the fact that you have to pay for the warranty up front, the savings may be worth the cost. Thus, this article describes what a house warranty is, and also the important details you must know.
List of Contents
What Exactly Is A Home Warranty?
A home warranty refers to a home protection plan. It is a yearly service contract that provides coverage for the cost of repairing or replacing main home systems. It also protects the systems and equipment in your home. However, if talking about homeowner’s insurance, it protects against the liability, loss of property, and expenses associated with a temporary dwelling. Thus, a home warranty is in contrast to homeowner’s insurance.
Working Principle of Home Warranty
Normally, after acquiring a home warranty, protection begins 30 days after the first payment. Importantly, if a covered item fails within the warranty period, you may submit a claim or service request with your firm and have the problem resolved.
Additionally, you may be able to roll your home warranty into your mortgage payments if you are in the process of acquiring a property. Consult your mortgage lender and home warranty provider to see whether this is allowed. Generally, the procedure of working principle of home warranty looks as follows.
- A covered system or appliance fails due to regular problems.
- To make a claim, you may contact your home warranty provider or submit it online.
- After the repair request has been filed, the company will normally dispatch a specialist to handle the faulty item within 24 to 48 hours.
- The specialist examines the system or appliance at your home and advises a repair or replacement. You would now pay the predetermined service cost.
- If the repair is inexpensive and the contractor has the appropriate components, the repair may be performed immediately. However, if a replacement is required, they will need to arrange a follow-up visit to complete it.
- After the successful installation, you will be able to make use of the system or appliance in its fully operational form.
The Coverage of A Home Warranty
The essential systems and appliances in your house are protected by the home warranty plan you choose. Generally, there are three categories of home warranty coverage which are system plans, appliance plans, and combination plans.
1. System Plans
These plans will cover the whole house, including the Air conditioning systems, heaters, ventilation, electricity, plumbing, water tank, trash disposal, smoke detectors, ceiling fans, and doorbells.
2. Appliance Plans
These plans include your refrigerator, dishwasher, range, oven, stove, built-in microwave, washer and dryer, garage door opener, and freestanding ice makers.
3. Combination Plans
These plans contain systems and appliances. Some home warranty providers will also enable you to personalize your plan and select the covered items.
The majority of insurance providers also offer extra coverage for things such as your pool, hot tub, spa, and second refrigerator. Customers may add these products to their monthly plan for an extra fee.
The Cost of Home Warranty Plans
A yearly home warranty costs between $300 and $600 on average. Basic plans that cover just systems or only appliances may lie at the lower end of this range. However, comprehensive plans that include systems, appliances, and add-ons will be closer to the upper end.
Additionally, in a monthly premium, users must pay a service call charge each time a technician visits their home to evaluate a covered device. Most service rates range between $75 and $125, however other businesses charge as little as $60.
Significantly, before purchasing a home warranty package, you should inquire about any ongoing deals or discounts. Some companies provide promotions in which clients get two free months upon enrollment.
The Regulation of Home Warranty
In contrast to insurance firms, which must be certified by The National Association of Insurance Commissioners and the Government Insurance Office, home warranty companies are not subject to any federal regulation.
According to the Service Contract Industry Council (SCIC), a national trade organization, the home warranty industry is governed by state-specific consumer protection legislation in all 50 states. Importantly, this organization works with legislators around the country to establish fair and standard regulations to protect customers,
However, some states may need a home warranty company to be licensed, whereas others just require registration. To be an authorized provider in a state, a business may be required to fill out a form and pay a fee. Nevertheless, it is not always necessary for the business to be certified or fulfill certain criteria before beginning operations.
Pros & Cons of A Home Warranty
Pros
✔ Providing peacefulness
✔ Providing a trusted professional
✔ Supporting alleviates
Cons
✘ Claims may be refused
✘ A service call is charged
✘ Several appliances may not be covered
Pros Clarified
- Providing peacefulness
If you are acquiring a property with used appliances and outdated systems, a home warranty might give you peacefulness.
- Providing a trusted professional
It is likely that you will have conducted contacts with local contractors or mechanics to assist with repairs if you are new to a town. However, your home warranty can provide a source and hire a qualified specialist for you.
- Supporting alleviates
Not many homeowners have the ability to do repairs on their own, so having a house warranty solves this problem. When anything breaks or falls into disrepair, the ease of making a single phone call may be highly appreciated by senior people.
Cons Clarified
- Claims may be refused
Claims might be refused by the home warranty provider if an item has not been properly maintained. This can be an issue, particularly for new homeowners who may find it difficult to present documentation of regular maintenance. Moreover, some home warranty companies use improper maintenance as a reason to deny legitimate claims.
- Several appliances may not be covered
If an appliance has to be replaced, you may not be able to choose the brand or model of the replacement. Additionally, under some appliances such as a power surge, it is possible that an item will not be covered.
- A service call is charged
Not all charges are covered by the home warranty, and you must pay a service call fee each time there is a problem. It is essential to understand what is covered and what is not. Check the protection plan to see the list of exclusions and decide whether you want to upgrade your contract.
How to Buy A Home Warranty
Before acquiring a home warranty, there are a number of considerations to make to ensure that you are receiving the finest protection plan for your house.
- Choose the type of plan you need
While some businesses may structure their plans according to the number of products that are included in each plan, others will break down coverage depending on the kind of item that is included. Before committing to a policy, it is important to make a list of the things that are currently located in your house.
- Consider the cost you are willing to pay
There are options below $50 per month that meet your needs if you are on a budget. Most businesses will let you pay on a monthly basis as opposed to an annual charge to make plans more accessible for individuals who cannot pay a large price upfront.
- Examine the company’s reputation
In a warranty business, it might be difficult to establish which are real. Thus, you have to look for a supplier with at least a B rating from the Better Business Bureau (BBB) to get a sense of what it is like to do business with the organization.
- Consider the coverages
Occasionally, a home warranty company may impose coverage limits on certain appliances or systems. This restricted amount will normally cover the cost of repairs. However, if a replacement is required, it may not be sufficient. For instance, if your electrical system has a maximum coverage limit of $2,000, you would be liable for any further costs.
Conclusion
To conclude, if you decide to purchase a house warranty, verifying its reputation with the Better Business Bureau is a very important thing. Moreover, you should also carefully check the contract’s description of basic coverage, optional coverage, and enhanced products. There may be no need to pay a higher premium for optional or enhanced coverage. You have the option of paying yearly premiums for peacefulness or establishing an emergency fund for future unforeseen needs.
FAQs
A house warranty plan often includes coverage for main home appliances, electrical, plumbing, and HVAC systems. However, coverage may vary based on the plan you select.
No, most home warranty plans do not cover pre-existing conditions or objects that were broken or damaged prior to the plan’s effective date.
Most home warranty providers cooperate with a network of service providers. Certain plans may permit you to choose your own service provider, but at an additional expense.
Read more: Insurance
Source: Bankrate, Thisoldhouse