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What is a Home Warranty?

A home warranty is a repair service contract for your home that will repair or replace covered appliances and home systems that break down due to normal wear and tear. The contract offers peace of mind, financial stability, and an ease of use that many home owners find beneficial. In this ultimate guide to home warranties, you will learn about how home warranties work, how they can benefit you, which home owners do best with home warranties, features you should look for in a home warranty, how you can make the most of your home warranty, and more.

How Home Warranties Work

How exactly does a home warranty work? We’ll explain the steps that you can expect to take with a home warranty company whether you’re just signing up or need a repair.

  • Home owners pay a service contract fee. This is typically assessed on a yearly or monthly basis. Most home owners pay between $300 to $500 depending on the plan and company chosen.
  • Home owners maintain appliances and home systems according to manufacturers’ specifications.
  • If a covered appliance or system breaks down due to normal wear and tear, the home owner contacts the home warranty company. Many home warranty companies have a toll free hotline or online customer service portal.
  • The home warranty company will perform basic troubleshooting to investigate the problem and determine the service provider needed to fix the problem. In some cases, the home warranty company may be able to help you fix the item over the phone or online without a home visit.
  • The home warranty company will contact a pre screened and contracted service provider to visit your home to perform a repair or replacement of the appliance or home system.
  • Home owners will pay a service call fee to the provider, typically between $50 to $100.

What Does a Home Warranty Cover?

Home warranties typically offer two or more levels of coverage, as well as the option to add other selected items for coverage for an additional fee. Most home warranties will cover all of the major home systems and appliances that break down due to normal wear and tear.

Basic items covered by home warranty typically include:

  • Heating system
  • Plumbing system
  • Electrical system
  • Oven
  • Stove
  • Dishwasher
  • Garbage disposal
  • Fans
  • Water heater
  • and more

Premium items or optional coverage available on a home warranty may include:

  • Air conditioning system
  • Refrigerator
  • Washer and dryer
  • Pool or spa
  • Roofing
  • Additional refrigerator or freezer
  • Septic system
  • Sump or well pump
  • Central vacuum

The Difference Between a Home Warranty and Homeowner’s Insurance

Home warranty and home insurance both protect your home, but they offer different coverage and are used in different ways. Home insurance is designed to protect your home in case of fire, accident, break ins, weather, and other perils or emergencies, while a home warranty covers appliances and home systems as they break down due to normal wear and tear.

For example, if your roof is damaged in a hail storm, or your kitchen is damaged due to a fire, you will file a claim with your home insurance company. But if you discover that your oven is no longer heating up, or your air conditioner doesn’t blow cold air, you’ll need help from your home warranty company to get them working again.

The Benefits of a Home Warranty

The basic benefits of a home warranty service contract are obvious: a home warranty offers home owners the assurance that their appliances and home systems will be repaired or replaced if they break down due to normal use. But there’s more, including convenient repairs and even home sales advantages:

  • Peace of mind: Home owners can relax knowing that any major repair problems with their home will be taken care of.
  • Financial stability: Instead of paying out of pocket for unforeseen repairs, home owners can budget for a monthly or annual payment, plus occasional low service call fees. The financial shock of repairs that pop up and cost hundreds or thousands of dollars is not a problem for home owners with warranty service.
  • Trusted, pre screened service providers: Home warranty companies use a network of licensed, insured, and pre screened service providers. Typically, the home warranty company has already completed satisfactory work with the service provider, so they are proven contractors that can be trusted to take care of your home. Plus, you don’t have to go through the hassle of finding a provider yourself.
  • Work guarantees: Home warranties typically come with a guarantee that you’ll be satisfied with the work offered by service providers. If not, they’ll send them back out or send a new service provider.
  • Faster, higher home sales: If you’re selling your home, or plan to do so within the next year or so, a home warranty can help you get your home sold faster and at a higher purchase price. On average, homes with warranties will sell 11 days faster and for $2,300 higher than homes without a warranty, making your $300-$500 a great investment.

Can a Home Warranty Save You Money?

A home warranty requires an initial expense, but in the long run, having a service contract is likely to save you money. An investment of $300-$500 per year, plus service call fees usually under $100 can save you thousands. In any given year, you could have a home repair that costs hundreds or thousands of dollars, often more expensive than the approximate investment of $600 that you’ve put in for your home warranty service contract. Consider the cost of repair or replacement for these home issues:

Who Benefits from a Home Warranty?

Home warranties are most often purchased by home sellers, Realtors, and new home owners, but a home warranty can benefit every home owner — and more. Home warranty service contracts are ideal for:

  • First time home buyers: Home owners in their very first home may not be familiar with repair needs and costs. This is especially true for former renters, who were able to call for maintenance issues instead of performing repairs independently. Plus, after making a down payment, paying for closing costs, and affording a mortgage, being able to handle unexpected repairs may be difficult.
  • Owners of older homes: As appliances and home systems age, they need more frequent repair or replacement. Most home warranties provide service for aged systems, provided they are well maintained.
  • Home owners who don’t want to DIY repairs: Some home issues can be DIYed, but not every home owner has the skills or desire to take on home repair independently. A home warranty service contract does it all for you.
  • Home owners who can’t afford surprise repairs: Home owners on a fixed income or a tight budget can appreciate the financial reassurance of avoiding surprise repair bills that can cost hundreds or thousands.
  • Home sellers: Adding a home warranty service contract can make your home more attractive to buyers, enabling you to sell your home faster and at a higher price. Plus, if there’s a problem with the home during the sales process, or after the sale, home buyers will look to the home warranty company for repairs, not you. Service contracts are typically transferable to new owners.
  • Real estate investors: Landlords are often asked to repair or replace items for rental homes, and a home warranty service contract can cut down on unexpected costs facing real estate investors.
  • All home owners: No matter your level of comfort with DIY repairs, age of your appliances, or home sales status, every home owner can benefit from the peace of mind offered by a home warranty service contract.

What to Look for in a Home Warranty

Not all home warranties are equal. Some offer features and coverage that you may need, while others do not. Consider these factors when you’re deciding on the right home warranty service company or level of coverage that’s right for you:

  • Coverage for appliances and systems that you’re concerned about repairing or replacing
  • Accessibility with ease of contact
  • Fast service for repairs and replacement
  • Low service call fee
  • Good reputation and a history of accepting valid claims
  • Acceptance of aged homes and appliances
  • Willingness or a guarantee to send service providers back out in case of a problem with your service or repair

How to Get the Most Out of Your Home Warranty

A home warranty is a significant investment, but it’s one that is likely to pay off with savings on major repairs and replacements. It’s a smart idea to get the most out of your home warranty, taking advantage of features and sticking to your contract to ensure that your claims are honored. You can get the most out of your home warranty service contract by:

  • Maintaining equipment: Your home warranty service contract will require you to properly maintain your appliances and home systems. That means performing maintenance work like regularly replacing your air conditioning filters and draining your hot water heater. Be sure to read your contract, as well as manufacturers’ instructions to find out how to maintain your home properly.
  • Avoiding claims denials: Claims are often denied due to improper maintenance, but can include other issues. Often, improper installation is an issue, so be sure that any new equipment you purchase is installed correctly. Abuse is another problem that can lead to denied claims. Be sure that you’re using appliances and home systems as they are intended and do not allow any harm beyond usual wear and tear to damage them.
  • Getting a home inspection: While a home inspection is not required by most home warranty companies, it’s a good idea to get one before you start your contract. Doing so can highlight any existing issues you may have with current appliances and home systems. It can also indicate whether or not your systems and appliances are currently in good working order.

Want to learn more about a home warranty service contract for your home? Contact us for details.