A home purchase is expensive but one of your best long-term investments. In addition to the high cost of homes, things breaking down and the need for repair is another expense you will need to incur.
Some homeowners buy a home warranty to mitigate the cost of repairs of major home systems and appliances.
What is a home warranty?
A home warranty is a residential service contract between you, the homeowner, and a home warranty company for discounted repair costs on selected systems and appliances in your home.
The warranty typically covers breakdowns that are due to routine wear and tear.
Types of home warranty Plans
Most companies offer three types of plans:
- Appliance plans cover major home appliances like refrigerators, microwaves, dishwashers, and washers/dryers.
- System plans, in most cases, cover the whole home systems, including HVAC, plumbing, electrical and garbage disposal.
- Combination plans are typically a merge of appliance plans and system plans.
Limitations of home warranties
Even though it can be cost-effective, there is a limitation to what you can get from a home warranty plan. The coverage also varies by company.
Remember to ask the warranty company about the limitation of your chosen plan before signing the agreement. Failure to do this might result in lots of surprises for you later.
For one, the company will only approve a claim within the limitation of the plan you purchase.
Things to consider before buying a home warranty
Home warranties are expected to help you reduce your home maintenance cost. Consider the following to ascertain if it is a good choice for you.
1. Time for plan activation
If you have a warranty plan, whenever there is an issue with any of your covered appliances or systems, you will need to reach out to the warranty company. The company will send an expert to your place to check the problem.
The company will go ahead to fix the issue if the quotation is within your coverage limit.
However, the company may reject your claim if you only recently purchased a warranty plan.
Some home warranty companies start coverage thirty days after the purchase of the contract. Waiting for 30 days before you get your refrigerator fixed can be inconvenient, especially during summer.
Read through the service agreement before signing to ensure the time for plan activation is convenient for you.
2. Coverage limit
Home warranties have limitations. The items covered are usually listed in the agreement, along with the maximum amount they are willing to spend on repairing your home appliances and systems.
Some policies, for instance, may cover your refrigerator but exclude the ice maker that comes with it This means if the ice maker develops a fault, you will have to fix it from your pocket.
It is common for home warranty companies to deny claims if specific events or actions cause the fault. An appliance, for instance, may not be covered if a power surge or natural disaster damages it.
3. Manufacturer’s warranty
Home warranty costs, on average, $450 to $600 yearly. The monthly average is estimated at $40 to $60.
You can reduce the cost of a home warranty plan by purchasing a policy covering specific home items.
New home appliances and systems usually come with manufacturer’s warranties, typically lasting one year. You do not need a home warranty for such items.
Home warranties are designed for items without a valid manufacturer warranty.
4. Age of home systems and appliances
The age of your home systems and appliances should be considered before a home warranty plan because the company will not cover existing faults in the covered items.
Since old appliances and systems may develop faults easily, a home warranty may not be cost-effective. Instead, replace them with a new model, and enjoy the manufacturer’s warranty, after which you can consider a home warranty.
5. Cost of home warranty
Aside from the home warranty plan payment, you will also be requested to pay a service call fee of about $70 whenever a technician visits to repair your appliances.
Many companies offer a repair guarantee, meaning you will not be charged after the first service call until the repair is successful, even if the contractor has to visit multiple times. The period for such a guarantee varies but is usually 30 to 60 days.
Read through the service agreement for the service call fee and repair guarantee period before deciding.
6. Customer service
The customer service representatives of your warranty company will always be the intermediary between you and the company whenever you need to file a claim.
Observe the customer service, notably their conversational tone and response time. You may also check online reviews of the company’s service before purchasing a plan.
