About the Home Warranty Industry
Home warranties provide coverage for homeowners in case they need major repairs. Plans can be bought from numerous companies that cover replacement or repair. There are many advantages to having a home warranty. In the event of a major appliance or home systems breaking down, a home warranty could save you a lot of money. However, there are also drawbacks in terms of coverage limits and associated costs. It’s important that you thoroughly research any home warranty company to make the right choice for your coverage. Compeare home warranty price quotes and make sure to get the right coverage, the cheapest option is probably the one you want to stay away from. Read this article to learn more about:
- What is required of home warranty service providers
- Compliance issues and rules
- State requirements
- What home warranties offer
- The benefits of home warranties
- The drawbacks of home warranties
Why Buy a Home Warranty?
Home warranties are purchased by many homeowners. Additionally, people who might buy a home warranty include landlords and people who sell properties. A home warranty adds a level of protection for your home. A home warranty can be bought that covers replacing or repairing all major appliances and home systems. Plans differ, so you will have to conduct research in regard to your particular coverage needs. Broadly speaking, these are the main things that are covered by a home warranty:
- Home systems:
- HVAC system including duct work
- Air conditioning system including duct work
- Heating system including duct work
- Plumbing system
- Plumbing stoppages
- Electrical system
- Water heater
- Tankless water heater
- Covered appliances:
- Clothes washer
- Clothes dryer
- Refrigerator with ice maker/water dispenser
- Range hood
- Build-in microwave
- Garbage disposal
- Additional covered items
- Ceiling fans
- Door bells
- Smoke detectors
- Trash compactors
- Garage door opener
- Inground pool
- Above ground pool
- Well pump
- Sump pump
- Water filtration system
- Plumbing fixtures
- Septic system pump/Septic sewage ejector pump
- Sewage lines
- Free-standing ice maker
- Central vacuum
- Stand alone freezer
- Lawn sprinkler system
There are three basic types of home warranties:
- Appliance coverage: which covers multiple appliances
- Systems coverage: which covers multiple systems such as air conditioning, heating and electrical systems.
- Appliance and Systems coverage: which covers appliances and systems.
Home Warranty Process
In order to secure a home warranty, you will want to follow a few basic steps.
- Research home warranties: there are many different providers. Each of these offer similar but distinct services. Their quality of coverage, customer service and fees will vary. You will want to research your options before buying a policy.
- Secure a policy: once you decide on the right home warranty, you will buy the plan and be covered. There will usually be a waiting period before your coverage is active.
- Familiarize yourself with the processes: you don’t want to wait until you need to file a claim to understand the procedure of obtaining repair or replacement for items in your home. Learn the process and any fees you will have to pay so that you are prepared.
Requirement of Service Providers
The home warranty industry covers millions of homeowners in the United States. Each state has specific rules regarding coverage. There are many companies that operate nationally, offering coverage to homeowners in numerous states. All home warranty companies have to comply with federal and state laws.
In the United States, a home warranty is a term that relates to a service agreement. It does not have the same legal implications as other kinds of warranties. The legality essentially extends to the contractual agreement for items covered and services promised. Some of these contracts are regulated by the state, requiring the warranty company to perform certain services.
Compliance regulations refer to the fact that, in many states, the companies that provide service on behalf of a warranty company must be licensed. This ensures that they are operating safely and will do a good job. It typically also means that the provider is insured, protecting both the homeowner and the home warranty company in the event of a mistake.
For most states, the Commissioner of Insurance is the regulatory agency that oversees home warranty requirements and stipulations. This regulation protects homeowners against fraud and other violations a warranty company could commit. There are varying coverage options state by state. When you shop for a home warranty, you will likely only be able to secure a quote after inputting your information, which will include your location. This will ensure that you are receiving home warranty information specific to your state.
What Home Warranties Offer
Home warranty companies offer a variety of kinds of coverage for repairing or replacing items. The policies provide coverage for items that are subject to wear and tear, as opposed to a disaster (which is why you need a home warranty in addition to homeowner’s insurance). Here are some examples of the services you could receive when you file a claim. This is just illustrative, as each home warranty policy will differ.
- If your refrigerator breaks down and it is covered, you can receive money to buy a new refrigerator.
- If your air conditioning breaks, you would pay a service fee and then a deductible, after which you could get a new air conditioning with minimal out-of-pocket costs.
- If your garage door stops working and it is covered, you could get a new garage door installed at minimal cost to you.
Home Warranty: Benefits
Home warranties have numerous benefits. They provide peace of mind, knowing that you will not be financially responsible if something wears out or breaks down. You can also avoid significant costs if a major appliance or home system goes bad.
Some people may benefit especially from a home warranty. These include:
- First-time home buyers, who may not have a lot of money for repairs or replacements
- People who are purchasing an older home
- People who are planning to sell their home, in which case the contract can be transferred to the new home buyer and adds value to the transaction
- Landlords or people who own rental properties
Additional benefits are:
- Not having to shop for a service provider: your home warranty company will have local providers who can come inspect, give estimates and provide repairs for your appliances and/or systems.
- Having coverage for a home that is 10 years or older. This includes appliances and systems that are more likely to need repair or replacement soon.
Home Warranty: Drawbacks
While largely beneficial, there are some drawbacks to having a home warranty. While they could provide peace of mind, they do not completely offset the cost of a major repair or replacement. Here are some drawbacks:
- Many home warranty companies draft policies in which the homeowner is still responsible for a financial portion of a claim.
- It’s important to know that there is a 30-day waiting period for most home warranty policies. There are service fees, which can be up to a couple hundred dollars, for every time you have a service visit.
- National home warranty companies contract service out to local providers, who themselves may vary in availability. In other words, if a major home system breaks down, it may take several days before you can receive service.
- Many home warranty systems will have a limit. For instance, if you have an appliance plan, you may have a $1,000 limit. If your refrigerator breaks down, you may get that in coverage and no more.
- A plan may have high deductibles, again requiring that you still cover out-of-pocket costs.
Frequently Asked Questions
Are home warranty plans worth it?
There are numerous kinds of home warranties. Home warranty plans have many benefits. They can save you money if one of the larger appliances or systems in your home breaks down. If this happens, it will save you thousands of dollars. Home warranties may be recommended by your mortgage company, because they protect you in the event of a large-scale issue. They are highly recommended and considered essential by most homeowners.
Will home warranty plans replace HVAC systems?
Home warranties are designed to protect you in the event that you need to replace a large system, like your HVAC. Coverage varies based on the policy you select. If you want your HVAC covered, there are warranty policies that will include it. You will want to understand your policy clearly, as it will contain criteria for whether your HVAC is eligible for repair, replacement, and what pre-existing conditions need to be taken into account.
Do home warranties cover pre-existing conditions?
There are many different home warranty companies. Some of these specialize in covering pre-existing conditions. Others will provide services to items that are old but show no signs of disrepair. If you have an older home or appliances, you will want to research which company offers the right coverage for you.
Does a home warranty cover old HVAC systems?
Every home warranty policy will have inclusions and exclusions. Some policies will offer comprehensive coverage that may include old HVAC systems. If this is a specific concern, you will want to directly contact the company and ask this question.