Purchasing a home warranty can provide you with peace of mind and financial security. It can offer you protection against emergency repairs and replacements that can arise due to aging pipes, electrical wiring, and other failures.
In this article, we will discuss the steps you should take before you purchase a home warranty.
But First – What is a Home Warranty?
A home warranty is not home insurance but a service contract that provides coverage for repairs or replacement of a home’s major systems and appliances.
Purchasing a home warranty can be a good way to protect your home and your budget should something go wrong with your air conditioning, plumbing, electrical, or other systems or appliances.
Benefits of a Home Warranty
Several benefits come with purchasing a home warranty, including affordability, convenience, flexibility, and protection for major household systems and appliances.
Affordability: Home warranties are much more affordable than replacing major household items such as refrigerators or washing machines out-of-pocket. Plans usually range from $200-$450 per year depending on the specifics of the coverage.
Convenience: A provider will send out a vetted local service technician to fix the issue without you needing to look around for contractors when you’re in a panic.
Protection: All homeowners are susceptible to normal wear and tear happening in their homes. A home warranty will provide coverage that homeowner’s insurance does not cover in the case of necessary repairs or replacements.
Flexibility: Home warranties can be adjusted for homeowners who may want certain items to be added onto their plans such as pool pumps/garage door openers/etc., giving added flexibility when it comes to customizable coverage to fit your needs.
5 Steps to Consider Before Buying a Home Warranty
1. Determine Your Home and Appliance Coverage Needs
Make an inventory list of the appliances and systems your home currently has so you purchase a policy that covers the items that need protection based on their age. Include the ages of items on your inventory list if you know them.
If the pool is new then you likely don’t need to include it as an add-on as it will be covered for a certain length of time by the manufacturer and the company that installed it.
If you bought or own an old home then look for a company that has the best coverage for older homes. There are some companies that won’t insure a Century or registered Heritage home.
Older homes (and sometimes newer homes) can have issues outside the home as well, such as sewer or water line breakage. If you are worried about these, look for an insurer that has add-on policies for these types of problems. Note* Usually sewage backup inside your home is covered under your homeowners’ insurance.
Companies often break down their coverages into systems, appliances, and add-ons. It can be cost-effective to buy a whole home package if there is one available.
2. Research Home Warranty Companies to Compare Coverage and Prices
Google is a wonderful thing (or Bing if you’re into that). Type in Home Warranty Reviews and you get the top 4 paid ads followed by a lot of comparison review sites. Don’t just assume if one company is at the top of the ads that it is the better one. Google works on who pays the most for ad placement (among other considerations).
Having said that, the top ads are a good place to start your research. Click through and find the Terms and Conditions of the companies, and any sample contracts they might have on their site. As boring and difficult as it can be to read these, you really should for your own protection. After you read a few of these, some points will start to stick out.
If you are currently buying a home you can use your Real Estate Agent’s Expertise. They will have vetted reputable companies already so they can be a wealth of information and cut down on your research (which you should still do anyway).
Another thing to look for is their workmanship and parts guarantee. Some companies will guarantee the repairs for a month, and some offer up to six months.
3. Shop Around and Read Reviews
Not all home warranty companies are members of the Better Business Bureau (BBB) but their site has great information on them anyway. You are looking for how a company resolves complaints. If one insurer has 100,000 customers with 200 complaints a year, but the company addresses them quickly and satisfactorily, they would be a good choice if all the other boxes are ticked from your research. The majority of complaints online are filed by unhappy customers- some of whom don’t contact the company first for a resolution or didn’t read the fine print to know if the item was even included in the policy.
Contact at least 3 reputable companies and compare one against the other. Using a spreadsheet is a great way to easily see who covers what and for what price.
4. Read the Terms & Conditions Before You Choose
As I mentioned earlier, before committing to any home warranty plan, it is important to read the terms and conditions carefully; some circumstances may make certain items ineligible, such as self-clean mode or pre-existing conditions.
A very important thing to find out is how their replacement works. Does the provider offer to replace a broken item with one of similar value and color, or will you end up with an inferior product? Can you upgrade to a better model if you pay the difference?
Finally, take note of any payout limits for repairs and replacements during your membership term. Different warranties provide varying levels of payouts in this regard.
5. What Are The Service Fees and Times For Dispatch?
Every company will have different fees to send out repair technicians. Some are as low as $70 and some are higher at $150. With some companies, you can choose your level of service fees. If you pay more, your monthly payments should be less.
Some companies will dispatch within 2 hours on weekdays and some state it could be 24 to 48 hours. Quicker is obviously better if you have water spraying everywhere but make sure other parts of the policy don’t leave you without adequate coverage.
The Limitations of Home Warranties
Home warranties are a popular service that can provide you with peace of mind when it comes to keeping up with repairs and maintenance costs on your home. While they may sound like a good deal, they come with some limitations. While researching, pay attention to the policy fine print since it could impact how much coverage you really get.
The Better Business Bureau has received a lot of complaints from customers who did not carefully read their policies and didn’t get the benefits they expected from their home warranty provider. The majority of the complaints include low payouts or complete refusal for certain items that they thought would be covered by the warranty.
When purchasing a home warranty, it’s important to understand what is being offered through the plan so you can be sure you’re getting adequate coverage for your needs.
Be sure to read your policy carefully so that you understand what is covered, costs associated with service calls as well as parts replacement and labor expenses should you need to file a claim.
Many home warranties have strict guidelines in place that require you to follow certain maintenance protocols on covered items in order to file a claim for them when an issue arises, so pay close attention to these terms if applicable.
Keep maintenance up to date on your appliances and systems and keep your receipts as proof.