Why would you want a home warranty when you have homeowners insurance? According to the top warranty companies, the last thing home buyers want to worry about after closing is what could possibly break or malfunction in their new home. Since that can cover a multitude of items and systems, for peace of mind, it’s a good idea to get a home protection plan. It’s especially a good idea to obtain a home warranty if you’re a first-time home buyer with no experience maintaining a home.
Warranties are fairly inexpensive, typically ranging from $250 to $400, depending on coverage. Although specific plans provide for specific types of coverage, most operate the same way. If a home system or appliance stops working, the home owner calls the home warranty company. The home warranty company calls a provider with whom it has a business arrangement. The provider calls the home owner to make an appointment and then fixes the problem. If an appliance cannot be repaired, the home warranty company will pay to replace the appliance and install a new one, after the home owner pays a small service fee (less than $100). Because all plans differ, if you’re considering purchasing a home warranty, you will want to ask exactly what is covered. Usually, a warranty covers air conditioning systems, dishwashers, furnaces, water heaters, ductwork, garbage disposals, ceiling fans, electrical systems, ovens and telephone wiring.
When you buy a car, computer, or any sort of electronic device or appliance, you’re usually asked if you would like to purchase a warranty. Did you know that you can buy a warranty for your home as well?
Warranties usually do not cover outdoor items, such as sprinklers, faucet repairs, refrigerators, washers and dryers, garage door openers or pools (unless specific coverage is requested).
Claims can be denied due to improper maintenance, code violations, unusual wear and tear and improper installation.
A home warranty contract promises to keep working items working for a certain time period, usually one year. There are two types of home warranties—the type already mentioned and home builder warranties on newly built homes. Builder warranty policies typically cover up to 10 years of structural defects; one year on items such as stucco, drywall and paint; and two years of coverage on HVAC, plumbing and electrical systems. Appliances are typically covered for six months.
In order to minimize misunderstandings, experts stress the importance of reviewing and understanding a service contract before purchasing it. “Like anything else, if you’re considering purchasing a home warranty, shop around,” said Tim Meenan, executive director of the Service Contract Industry Council, a national trade association that supports home warranties and advocates the regulation of the industry. “Read what’s covered and the exclusions. If you read those two sections, you’ll have a good idea if it’s a policy you want to buy.”
A home warranty service contract isn’t an insurance policy that protects you from loss. It is meant to provide service, repair or replacement on a home’s appliances and major systems. Like many other services, some people are very pleased with them and others are not happy at all. One man said, “I did the math—I paid all this money for the warranty and then $50 to $75 for every service call—it wasn’t worth it. Plus, the people they sent to do the work were late and unprofessional. I was not happy.”
On the other hand, Michelle M. had nothing but good things to say about the contractors who repaired her pool and spa, and plans to use them in the future. Gayle W. said she successfully utilized her warranty 10 times in the past five years for repairs to her washer, dryer, refrigerator, freezer, microwave and clogged drain. “I’m delighted to have someone to call when I have a problem,” she added.
The real estate industry is closely tied with home warranty service contracts. “It’s about liability control,” said a highly rated broker who requests that every seller buy a home warranty for the buyer to reduce their chances of being sued if an appliance or system breaks down. “You’re telling the buyer everything you know about the house in a disclosure statement, but what happens if something breaks shortly after you sell your house?”
“I think home warranty contracts are a good concept, but mislead buyers into thinking that they offer a guarantee on the house,” said Jen, another highly rated realtor. “I also think the fine print can be prohibitive to the needs of many situations that buyers are likely to encounter.”
The owner of one warranty company said, “It’s unfortunate when the services rendered do not meet expectations. I can speak firsthand of the desire we have to make a positive difference. In addition to thorough coverage, providing competent contractors for plan holders is our priority.”
Three million homeowners bought home warranties last year. Yet at the same time, for six years running, home warranty companies have led a list of the most complained about companies in America. The industry as a whole is legitimate. Some buyers regret their purchases and others don’t.
If you decide to purchase a home warranty, research all the companies in your area thoroughly and choose one backed by the Better Business Bureau. Read all the fine print carefully, know what is covered and what isn’t, then relax and enjoy the peace of mind that comes with your new warranty.