Home Warranties: How Do They Work?

During our house hunt, we’ve found several homes that include a home warranty as part of the sale of the home. Even if the sellers don’t offer one as a sales incentive, our agent recommends that we ask for one as a contingency in our purchase offer.

Why?

Well, why NOT?

A home warranty is a great option to give you peace of mind with such a large purchase.

What Is a Home Warranty?

It’s a home protection plan that helps cover any unexpected repairs. This is a great idea for first-time home buyers who may not have a lot of experience maintaining a home.

How Can I Get a Home Warranty?

There are several ways of getting one:

  • Your seller can “throw one in” as part of the sales agreement.
  • You can purchase one on your own through a home warranty provider.
  • If you’re buying a new construction, it may already be included in the sale agreement. I know when I bought my townhouse, I had a two-year warranty that covered the structure of the house and a one-year warranty for the appliances. Since it was a new construction, I never had to use them, but they definitely gave me peace of mind knowing they were there for me to use, if needed.

How Do Home Warranties Work?

If something breaks down, you’d call your home warranty provider. Then they would get in touch with a third party contractor with whom they have a business arrangement. Then, this third party company would get in touch with you to schedule an appointment.

The nice thing is that you don’t have to pay for the actual repair or replacement, which can cost from several hundred to thousands of dollars. However, you’d be responsible for paying a trade service fee, typically ranging from $75-$125

How Much Does a Home Warranty Cost?

Prices can range from $200–$400 annually. But, of course, it depends on how comprehensive your policy is.

What Do They Cover?

Each policy and company is different, but these are the things typically covered under home warranties:

  • Appliances: refrigerators, dishwashers, dryers, washers, ranges/ovens/cooktops, built-in microwaves, icemakers, trash compactors, garage door openers, and built-in processors.
  • Systems: air conditioning, heating, electrical, plumbing, water heaters, garbage disposals, central vacuums, smoke detectors, doorbells, ceiling fans, telephone wiring, ceiling fans, and doorbells.

What Can Cause Denial of Payment?

There are cases when a company may deny payment for a repair or replacement. Some include:

  • Lack of maintenance
  • Not installed properly
  • Code violations
  • Excessive wear and tear
  • Pre-existing conditions
  • Appliance or system is not included in the policy (check if your policy has an excluded appliances clause before you buy it)

Owning a home can be both very rewarding and scary. As the owner, you’re responsible for doing any repairs and maintenance, which can be costly. This is why having a home warranty can really be a lifesaver.

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2 Responses to Home Warranties: How Do They Work?

  1. Allyse Fenny March 18, 2013 at 5:37 am #

    Having a home warranty can really be a lifesaver. But you need to read your policy thoroughly and carefully so you will not get disappointed with your claims eventually.

  2. Jenn Baker March 3, 2014 at 3:21 pm #

    One of the most devastating scenarios occurs when damage is not covered by homeowners’ insurance or a home warranty – so it is important to understand your agreement and also to ask questions if you are unsure about anything. The more you know, the more you can adequately prepare! Home warranties can be a great feature on your home if certain appliance warranties are running out, too.

    Best,
    Jenn

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