How Do Home Warranties Work and What Do They Cover?
When you’re buying a house, closing day will come up a lot faster than you think, and you’ll need to make sure you prepare for this day.
You’ll have to buy homeowner’s insurance, get a cashier’s check, and show up to the closing appointment on time.
There are so many last-minute tasks to accomplish, too, and one is deciding whether to get a home warranty.
If you’ve been tossing around this idea for a few weeks and are still wondering “how do home warranties work,” let me explain a few things to help you understand.
What Is a Home Warranty?
A home warranty is a service plan designed to protect specific components and things within your home. If you think of what a warranty is on a TV or something similar, you may understand what a home warranty is.
When you have a warranty on your TV, it means that you have protection for it if it breaks. The company offering the plan would fix or replace it for you. You may have to pay a small fee for the services, but you wouldn’t pay the full bill.
Home warranties work exactly like this, except that they cover a lot of different parts of a home.
What Do Home Warranties Cover?
When purchasing a plan, you can pick and choose what it covers. If you want a policy that covers everything, you would want to include the following things:
- All the kitchen appliances
- Washing machine and dryer
- Hot water heater
- Heating and air conditioning systems
- Electrical system
- Plumbing system
You can opt-out of coverage for some of these items, too. You can also add coverage for other things, such as your garage door opener, sump pump, or hot tub.
How Do Home Warranties Work?
Suppose your hot water heater stopped working and that you included it in your plan when you purchased your policy. The first thing you’d need to do is call the company that is providing the warranty policy to you.
The home warranty company would take a look at your plan to verify that it provides coverage for your water heater.
Once they verify this, they will contact a service provider in your area that provides repairs for hot water heaters. This service provider would then contact you to schedule services.
When the service worker arrives and diagnoses the problem, he or she will determine whether to fix the appliance or replace it. In either case, the contractor bills your warranty company for the work, and they pay the bill.
Now, you should understand that plans have limits on coverage and charge fees for service calls. You may have to pay around $50 to $100 anytime a company comes to your home to fix something, but that sure beats paying full price for the services.
A plan may also have stipulations relating to how they decide when to fix something and when to replace it. For example, a warranty plan might state that if the repairs are equal to 75% of the value of the item, they will replace it instead of repairing it.
As you see, when something breaks, you make just one phone call. That one phone call, though, leads to a solution for your problem, and you pay only a small portion of the bill.
Why Should You Purchase One?
You can probably tell by now that having a home warranty is a smart idea, but if you’re still not sure, check out the following benefits:
1. You Have Peace of Mind
Would you ever allow your homeowner’s insurance policy to lapse? Probably not, as a lapse in coverage leaves you in a highly vulnerable state. If your house burned down at that time, you’d lose everything. Having your house insured gives you peace.
Having a home warranty also provides peace of mind. If a covered appliance or system breaks or experiences any type of problem, you know you will receive services quickly. Knowing that help is just a phone call away provides a lot of peace.
2. You Can Protect Your Budget
Two, do you care about your budget? If you are cautious with your money, having a home warranty makes a lot of sense.
With one, you pay the annual fee and never have to worry about paying outrageous expenses when you need repairs or replacements. You pay a small fee, and that’s it. Your budget is protected.
3. You Won’t Have to Find a Contractor for the Job
Another benefit is the simplicity of getting work done when you need it. You won’t have to search for the right contractor to call. The home warranty company finds the contractor for you, and the contractor contacts you.
One More Thought on Why You Should Buy a Plan
If you feel that having homeowner’s insurance is enough, it’s also important to understand that this is not the case. A home warranty kicks in by filling in the gaps. A home warranty covers the things your insurance policy doesn’t cover.
So, if you want to have coverage on everything you own, adding a home warranty is the way to go.
How Much Do They Cost?
On average, a service contract for a home will cost between $480 to $1,020 annually. Every plan and situation is different, though.
A company that offers home warranty plans can give you a quote for coverage if you’d like to find out the costs you’d have to pay. When you ask for a quote, they’ll ask you a lot of questions about your home and the items in it.
They base the quote on the specific items you want coverage for and on their ages and conditions.
Learn More About Home Warranties
Having a home warranty makes so much sense and is ideal for just about any homeowner. Don’t you think?
Hopefully, I answered your question on “how do home warranties work?” If you still need information, you can find more helpful articles by checking out our blog.