Even though Home Warranties are called warranty policies, they are in actuality service contracts — so they are not an insurance policy or a warranty.
They were created to provide financial protection for homeowners faced with the failure of major mechanical systems, such as the home’s heating and air conditioning. They usually require a service fee paid by you and the warranty company covers the cost of the repair or if it can’t be repaired, the cost of replacment. And fyi they don’t replace if it can be repaired — even if the repair just brings it to minimal operating condition. so if it operates — regardless of how poorly – as long as it works. So home warranties provide, most of all, peace of mind.
What does a warranty cover?
Home warranty companies offer a variety of plans and typically the more you pay, the more your plan covers. Most of the basic warranties – first tier and second tier plans – cover the following:
- HVAC System – heating, ventilation and air conditioning system components such as heat pumps and ductwork.
- Plumbing – all of the home’s interior plumbing system components such as pipes, drains, and faucets. Some home warranty plans cover outdoor plumbing as well, such as the sprinkler system. Some companies offer a separate policy for hot tubs and pools.
- Electrical system – wiring, doorbells, electrical panels and other electrical system components are covered under either Tier 1 or Tier 2 plans.
- Major appliances – the basic plan typically covers the range, refrigerator, garbage disposer, washer
- and dryer and water heater.
Exclusions
This is where you want to read the fine print. Not everything in the home is covered under a home warranty. Like inclusions, exclusions vary, depending on company. The following are some common home warranty exclusions:
- Normal wear and tear
- Problems that arise from deferred maintenance
- Insect or vermin damage
- Damage caused by the homeowner
- Structural problems (leaky roof, cracks in walls)
- Acts of God (earthquake, flood, etc.)
One small thing that you don’t often think about is the ice maker in the refrigerator. A client of ours left town just after settling on the purchase of a home and a malfunction in the ice maker caused it to drip and by the time they got back, they had standing water in the kitchen. The home warranty covered the frig but not the ice maker. So when I look at a home warranty, that’s something I now look for. You can usually buy that extra coverage for not much money and it’s a good idea.
Here’s some other items that you can buy at an additional cost:
- Well pump (highly recommendeed
- Septic system (again, if you have one, this is highly recommended)
- Spa
- Pool
- Central vacuum system
How much does a home warranty cost ?
The average cost of a home warranty ranges from $360 to $1,425 a year, depending on the company and what the warranty covers. Most warranty companies offer a lump sum payment plan or a monthly payment plan.
“When paying monthly, the average starting cost for a basic plan is $36.32 per month,” according to Kathryn Parkman at consumeraffairs.com.
She goes on to say that you’ll pay nearly $69 a month, on average, for the comprehensive coverage.
When something breaks, you’ll call the home warranty provider’s service department and they’ll send out a service technician of their choosing. The technician then bills the home warranty company directly, but you will be required to pay a service fee (think of this as akin to a health insurance co-pay) each time a repair person comes to the home.
The nationwide average service fee price range is $55 to $150, according to Meghan Wetland at bobvilla.com.
Many home warranties not only cover repair but replacement of appliances as well, meaning that if it can’t be repaired they will install a new one.
Are home warranties worth the money?
Some say they aren’t worth the paper they are written on. And some say that they are absolutely worth it especially for a home you just purchased. One client of ours used their home warranty extensively to repair an air conditioning system that never operated well. The home warranty company wouldn’t replace it so they spent their own money to replace. So they believe home warranties are a waste of money. Another client of ours moved in their home and within a week the well pump stopped working. It couldn’t be fixed so the home warranty company replaced it. So they believe a home warranty is a must.
I think it’s a good idea to buy a home warranty, Especially during the first year you are in a home, when you may be strapped for cash.. If a major system in the home malfunctions, the price to repair or replace can devastate your savings. A home warranty offers both peace of mind and financial security.
