What Is a Home Warranty?
A home warranty is a type of insurance policy. It can pay for the repair or replacement of major appliances. It can also pay for repairs and replacement of plumbing and electrical wiring if you pay for that type of coverage.
What Are the Benefits of Home Warranties?
Studies suggest that two-thirds of homes experience at least one major appliance repair every year. It might be the refrigerator this year and the oven next year. And this isn't just the case with older homes. Around one in five new appliances will break down within the first four years you own it.
How Are Home Warranties Different from Appliance Warranties?
Home warranties are very different from the warranty you may get when you purchase a new HVAC system or refrigerator. The store warranty only covers key components for that appliance for a set period of time. A home warranty can cover a variety of items in your home. You can choose what gets covered and what isn't. You can also seek insurance coverage for repairs to items you already purchased through a home warranty. That means getting protection for your appliances is as simple as contacting a home warranty company and asking about their rates.
What Factors Determine the Cost of a Home Warranty?
The risk of repairs and total breakdowns is tied to the age of equipment. This is why you'll pay more to insure an older heater, boiler or air conditioner than a new one. You'll pay more for comprehensive home warranties than more limited policies. For example, home warranties may cover part of the repair cost or only cover catastrophic failures such as when you have to pay for a whole new air conditioner. The more risk you take on yourself, the lower your premiums will be. This is why your policy will be cheaper if the policy doesn't kick in until there is a major repair bill.
The cheapest policies are those that only cover key appliances like your washing machine, dishwasher, and refrigerator. Systems coverage covers your AC, furnace, heat pump, water heater, and plumbing. A combination coverage is a combination of those two types.
What Isn't Covered by Home Warranties?
A home warranty doesn't cover equipment outside of its very limited scope. For example, you'll have to apply for an add-on if you want to have that pool pump covered by the home warranty even if the indoor plumbing is covered. Appliance coverage is typically limited to the kitchen appliances, so you'll need an additional rider if you want it to cover the upright freezer in the garage.
Home warranties don't cover damage caused by weather related issues. This means the warranty will cover a motor going out from standard wear and tear but not when it is due to flooding. Deliberate property damage isn't covered, either.
Doesn't My Homeowners Insurance Cover This?
Homeowners insurance may pay to replace your appliances if they are lost to fire or flood, but it won't pay for a new AC compressor or oven control panel. Homeowner's insurance may pay for the water damage from a hot water heater leak, but it may not pay to replace the hot water heater.