The Basics of a Home Warranty

What is a Home Warranty?

A home warranty, sometimes called a home service contract, is a form of insurance that covers items in your home. It typically covers up to a certain dollar amount per year for each covered item, based on its original purchase price. When an item breaks down or has a problem, like water damage or theft, the warranty helps cover repair costs. A home warranty also covers items like air conditioning units and furnaces. These items are often not covered by regular homeowners insurance policies.

What Does it Cover?

Most home warranties cover certain appliances, systems, and even parts and materials. Of course, coverage varies depending on what type of warranty you purchase. Usually, your warranty covers heating, air conditioning, and plumbing (including septic tanks). In addition, it covers electrical components, roofing systems, major appliances (refrigerators, freezers), range hoods/filters/fan motors, dishwashers, and hot water heaters. Sometimes, a covered item breaks down or fails prematurely due to a defect in materials or workmanship. Most home warranties promise to repair or replace it at no cost to you.

Who Should Get One?

People who own relatively new homes (with less than 15 years on their mortgage) benefit from a home warranty. Likewise, those who have a number of home systems, particularly new ones, like solar panels or wind turbines, benefit from coverage. Even if you’re planning to do most or all of your own repairs, it may be worthwhile to get a home warranty anyway. That way, when something unexpected happens and you need outside help (or knowledge), you’ll know where to go for help. Someone looking at purchasing a house should consider getting a policy before they sign their mortgage papers.

How Much Do They Cost?

While home warranty costs vary by provider, a typical package covers major appliances and/or systems in the home. You can buy a plan that will cover the entire house (including parts and labor) for $200–$300 per year. You can also choose one that covers just a specific area of the home like plumbing or electrical. The more you want covered, the higher your price tag. Generally speaking, even basic packages are still pretty affordable. You can expect to pay about $100–$150 for annual coverage on individual appliances (laundry machines, refrigerators, dishwashers). A package covering all your appliances costs about $200. For a complete home plan, you’ll pay up to $600 for coverage.

Are there Other Warranties to Consider?

If you’re considering purchasing a home warranty, you may also want to consider what are called extended warranties. They cover more than just major appliances and home systems. Extended covers your flooring, dishwasher, ceiling fans, and even fixtures. In addition to making sure your home is covered for all foreseeable (and unforeseeable) mechanical issues, extended warranties can also save you some money when it comes to repairs. Some manufacturers will charge up to $60 for an hour of service on their product that comes with their standard warranty. However, by opting for an extended warranty from a third-party company like SquareTrade or American Home Shield, you can avoid paying manufacturer service fees altogether in many cases.

When does it Start and End?

A home warranty is typically valid for one year and a homeowner must register it within 30 days of moving in to be covered. Sometimes warranties start earlier. Many providers offer 90-day trial periods that allow homeowners to ensure their new home meets their needs without having to worry about sudden failures. If they don’t need a warranty, they can just not renew it at the end of its term. And like all things, if a home warranty company doesn’t honor its agreements or handles an issue poorly, it’s always free to switch companies. Some will even help you find and compare rates so you can pick a new provider if needed.

Types of Plans Available

There are two types of home warranties, depending on how much coverage you want and what kind of items you’re looking to insure. Extended warranties generally provide more coverage for larger appliances and equipment like washers, dryers, stoves, and dishwashers. Coverage for smaller items such as plumbing, HVAC systems or electrical is often part of comprehensive plans. All-inclusive plans are great if you need all those elements and don’t mind paying one price. All these options vary in cost depending on your location and chosen insurance provider; some providers have competitive rates that may allow you to put off an upgrade or replacement while others charge higher prices but also have better services available to plan holders with questions.

Where Can I Get One?

There are many options for purchasing a home warranty; some even allow you to purchase them online. Depending on where you live, there may be a number of companies offering coverage. As well, if your landlord offers a warranty for your apartment or condo, it’s worth looking into. Some home warranties have yearly or monthly fees that add up over time; others cost nothing out-of-pocket aside from deductible costs when they’re used. The good news is you can shop around and compare services and prices in your area to make sure you get something that suits your needs best.

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