A home warranty sounds like it is a great form of monetary security against unexpected, expensive home repairs. But you should understand what is covered in a “standard” home service contract. When you are buying a home, there is possibility that you were provided with a home warranty by the seller and you assumed that it will take care of all repairs inside your home. But there are some items NOT covered in a home warranty.
Basics of home warranty –
The best answer to this can be found by evaluating your specific contract or by reviewing an on-line contract sample.
Basic coverage includes:
Because coverage differs from policy to policy and from state to state, request to see a sample copy of a policy before you commit. The sample copy clearly states what items would be covered under your home warranty policy and also the extent to which the items are covered.
As discussed above, the contract covers only those parts, systems and appliances that are mentioned as covered and excludes all others. Remember you can always pay an extra premium to cover these items before you sign the contract. You can read more about including these items under “Types of Coverage” further down in this article.
However, for items such as washer/dryer, kitchen refrigerator, air conditioning, spa equipment, pool, roof leak repair, etc, additional or optional coverage are available for an extra fee at the time of contract. Verify your contract to check which items are listed under optional coverage, if any, were paid for.
A home warranty is neither similar nor it is a replacement for homeowners insurance. Homeowners insurance policy covers major unforeseeable events such as fires, theft, property crimes, hail and certain types of water damage that could have an effect on the homeowner’s personal possessions and the entire structure. A home warranty does not cover these hazards but it covers particular components of the home. It covers regular wear and tear defects which may include an older air conditioner break down or requiring certain parts changed if you have kept up with the needed maintenance. In simplest terms, a home warranty is an additional coverage for the items in your home which might initially have been covered by a manufacturer’s or builder’s warranty.
When you purchase a home warranty, you are principally signing a service contract. The contract provides for low-priced repair and replacement service on a number of major home appliances. Most plans have a basic component that offers all the homeowners who pay for a policy with certain coverages. The contract will spell out which appliances it’ll cover, how much is required to be paid per occurrence and what is not covered. For instance, structural aspects of your home are not covered. So if your roof falls down, that would be covered by homeowner’s insurance. In case your water heater leaks, the water heater would be covered by a home warranty but the consequent water damage would be homeowner’s insurance issue. Homeowners are also allowed to procure one or more optional components that give additional coverage at additional cost.
They are quite inexpensive, usually ranging from $239 to $619, based on the coverage. Home warranty companies every now and then run special discount policy prices or special sales or provide additional coverage for the same price. The policies are prepaid for a year in advance, after which they run out or can be renewed. Some companies provide you with the option of breaking up the premium into monthly payments so as to reduce the burden of making one upfront payment.
Though specific plans offer definite types of coverage, most operate in the same way.
Watch this video to know how home warranty works –
As all home warranty plans differ, you are required to ask specifically what is covered under your plan. Inquire with your real estate agent if upgrades are available. Make sure to know whether the home warranty company will pay for your repairs to make certain types of appliances or systems compliant with new regulations. Pay close attention and read the home warranty contract cautiously to know the coverage, limitations and exclusions.
Home warranty companies have three types of coverage – basic coverage, enhanced coverage and an optional coverage. Some companies may not have a basic coverage but have a standard policy instead. Don’t get confused, they are the same. It’s just that different companies have different names.
A basic home warranty coverage includes major systems and everyday use appliances. The items covered in a basic coverage sometimes differ from state to state. The list of everyday use appliances varies depending on the climate conditions and other factors. For example, plumbing system, built-in microwave, ceiling fans, etc
Not all companies include the same list of items in their standard policy. What one home warranty company may include in its basic coverage, another company may list under an enhanced coverage.
The enhanced coverage includes certain systems and appliances that are not included in a basic plan but are commonly used. An enhanced coverage costs slightly higher than a basic coverage. In certain home warranty policies, your HVAC, refrigerator, washer/dryer, etc, are not included in the basic coverage but are a part of the enhanced coverage.
Optional coverages include those items that are not covered under a basic or enhanced coverage. This coverage gives you the option of adding your pool, spa, wine cooler, well pump, etc, to your home warranty policy. You need to pay a fixed extra premium to add an optional item to your home warranty policy.
Most home warranty company websites have a sample policy that states what items are included in a basic, enhanced and an optional coverage. Make sure to read through the document to gain a clear understanding on the items included under each policy.
Home warranties may be procured by individuals buying a new or used home, landowner, and persons selling their homes or investors. Each company’s coverage is decided by the terms of its contract, but basic home warranties usually cover the parts and labor on or replacement of chief home systems and equipment.
What’s covered? Most home warranty firms provide a variety of plans, all offering different levels of coverage, so be sure to study the details of any contract before procuring. Even if you decide to renew the contract from year-to-year, double check the details of your plan as the coverage can change every year. If the policy does not cover some of your appliances, you can check with the company’s representative whether you can opt to include additional appliances in your plan by paying a slightly higher premium.
Here is a common idea of what a homeowner can wait for to find in each tier of service.
A home warranty is not an ideal solution to the risks homeowners face. Before buying one, it’s important that the homeowners read the home warranty contract and consider whether the warranty is likely to pay off. Home sellers who want to provide a warranty to buyers, and homeowners or buyers who feel more relaxed having a home warranty should also do extensive research to get a reputable home warranty company that will, in fact pay for legal genuine repairs when they are required.
Other home warranty tips –