Home Warranties FAQ: Definition, Benefits, Costs, Exclusions & Limits

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Buying a house is a big event. For most people, it is one of the most exciting purchases they will ever make. An expensive repair bill, however, can quickly dash the joy. To avoid being saddled with unforeseen repairs after closing, many buyers will hire a home inspector. While a smart idea, home inspections are usually visual. They cannot guarantee that a critical system or appliance won’t fail once you move into your new house.

A home warranty can help defray the costs of repairing or replacing covered systems if something breaks. Following are a few frequently asked questions about warranty protection. Check them out before purchasing your next home.

What is a Home Warranty?

A home warranty provides for the repair or replacement of many major systems and appliances in your house. Some potential areas of coverage might include:

  1. Major appliances
  2. Garage door openers
  3. Heating, ventilation, and air conditioning systems
  4. Electrical systems
  5. Plumbing systems
  6. Ductwork

What are the benefits?

A home warranty does not guarantee that a homeowner will never have to pay for any repairs. Instead, it provides peace of mind, especially for a new owner. The purchase of a house leaves many buyers with very little cash for costly, unexpected repairs. Avoiding expensive breakdowns is not the only benefit. However, it is arguably the most important.

Many warranties also include help with finding a contractor. A buyer will only need to make a phone call to the warranty company to establish their claim. The warranty company will then dispatch a trusted, licensed, and insured contractor with the experience and resources to complete the project. Promptly locating a reputable contractor is more than a convenience. It can help the homeowner avoid the risk of potential delays and increased expenses associated with unlicensed or dishonest repair companies.

Additionally, home warranties limit an owner’s risk of prolonged wait times to schedule a technician and excessive service call fees. The warranty company typically negotiates a nominal service call fee and agreeable response times in advance. For many types of repairs, a quick response may save a homeowner more than the cost of the annual fee.

home warranty. family

What are the costs?

  1. Possibly no initial cost – There may be no initial cost to buy a home warranty for some home buyers. Many smart sellers provide this at no additional charge. Buyers and sellers both enjoy added protection and confidence in the deal.
  2. If the seller does not offer a warranty, buyers can still enjoy these benefits by purchasing a home warranty from a reputable company.
  3. Annual Fee – Usually, there is a yearly fee based on the level of coverage chosen. This fee typically ranges from $300 – $600 per year. With some plans, the cost also includes annual maintenance or inspections.
  4. Service Call fee – Once a technician checks out the covered item, a service call fee is due. This fee is usually about $75 – $125.
  5. In most circumstances, except for the service call fee, the cost to repair or replace the appliance or system is completely covered. A homeowner may save enough money on a single claim to pay for the annual fee.

What are the Coverage Levels?

Coverage levels vary by company. Most insurers offer multiple tiers to allow homeowners to choose their preferred level of protection. Carefully review the options to ensure that you receive the coverage that best fits your needs.

  1. Primary or basic level coverage usually includes normal wear and tear of major systems such as heating, plumbing, air conditioning, electrical, most major kitchen appliances, water heaters, and garage door openers.
  2. Premium coverage might expand covered items to include garage doors, pool/spa equipment, and washers/dryers.
  3. Optional coverage – there may be an option to elect coverage for specific items for an additional fee.

What are the exclusions and coverage limits?

No warranty program will cover everything in your home. Some exclusions will apply. Following are a few provisions to look for in your warranty agreement.

By Jai Ross

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