Every homeowner wants to protect their property in every possible way. Nowadays, when our homes are getting filled up with expensive appliances that cost a small fortune to repair, this issue is getting ever more prevalent. Home warranties are advertised as some “ultimate protection” that will save you from paying for expensive repairs. However, before you purchase one, you need to understand how they work correctly and whether you can truly benefit from this plan.
How Does A Home Warranty Plan Offer You Protection?
In theory, home warranty plans work similarly to a manufacturer’s warranty but have much more extensive coverage. The warranty kicks in if one of the covered items breaks down. When this happens, you contact the warranty provider, and they send a contractor to have the issue fixed.
Depending on the plan, the home warranty company will cover all or part of the repair cost. However, you will need to pay a set service fee as well as your yearly premium. The latter usually amounts to about $600 a year.
Considering that the average appliance repair costs range from $200-400 for a fridge to $120-500 for a washer, the warranty makes sense. If you have several of the appliances break down in a year, a good plan will help you save money, especially if the problems are big and expensive to fix.
But if they don’t break down, it’s only you who can decide whether the peace of mind you get from knowing that this protection is there “just in case” is worth $400-600 a year.
Also, consider another significant benefit. As mentioned before, when any of the appliances or systems covered by a home warranty plan break down, you contact the provider, and they are the ones to send the right contractor to you. It means you get to save a lot of time and avoid a stressful search for repair service. That alone might be worth the annual cost of the plan.
Please bear in mind that home warranty coverage is very different from home insurance and they are not mutually replaceable. Unlike homeowner’s insurance, which is a mandatory requirement for the majority of lenders and in some other cases, a warranty plan is more of a “perk”. It means that it’s not mandatory or even necessary. But under the right circumstances, it can be very beneficial.
Items usually covered by home warranty plans include:
- Furnace (heating systems)
- Water heater
- Ductwork to code
- Ceiling fan
- Oven and microwave
- Electrical system
Home warranty plans also often have optional coverage that costs extra. This coverage varies depending on the provider and can range from pools to air conditioners.
Why Not Everyone Benefits From A Home Warranty
Home warranties seem like great protection, especially for homeowners who recently made upgrades and need extra protection for their new appliances and systems. However, in many cases these plans do not work out, so warns the Better Business Bureau. One of the main reasons for that is that the companies do not meet their obligations in regards to payments.
It means that the first thing you should do if you consider purchasing this kind of protection is to study unbiased home warranty reviews. They will provide you with an objective look at the company and the plans it offers. An honest review will never be 100% positive as this isn’t the type of industry where a business can have a spotless reputation.
Therefore, when studying these reviews, you should pay attention to the following:
- Testimonials from customers
- Coverage terms
- Contract’s terms and conditions
- Payout limits
The great news is that in the age of the Internet it’s easy to find this kind of information. You can also research the company using a simple Google search to learn stories about any shady deals it’s been involved with. You’ll be able to discover both personal stories and nationwide scandals.
The reasons the majority of home warranty companies use to avoid paying are:
- Incorrect installation
- Improper use or lacking maintenance
- Pre-existing condition
- Code violations
- Wear and tear that doesn’t match the usual projected rate
A crucial thing to understand here is that all these points make sense from the legal point of view. Any contract will say that the company is not obliged to pay for repairs of a pre-existing condition or if the user’s own mistakes cause the breakdown. Therefore, there’s no avoiding such “loopholes” that give less than reliable providers a chance to avoid responsibility.
It means that the only thing you can count on is the provider’s reputation, and that isn’t a 100% accurate measurement of the company’s reliability.
In light of this, a home warranty might turn out to be a complete waste of money on your part. Also, it will be the same if you don’t choose your coverage wisely and pick a plan that doesn’t match your personal needs well. It can be a problem because the majority of providers only offer a limited selection of plans. Therefore, even with optional coverage, it can be hard to find a perfect fit. The chances are high that you’ll be paying for something you don’t need at the moment.
Conclusion: Do You Really Need A Home Warranty?
Building an emergency fund for repairs might be more effective than a home warranty in the long run.
And yet it might not because if the plan works as promised, it will be a great relief to the homeowner.
The bottom line is that home warranties aren’t the “ultimate protection” they are often advertised as. However, they are A protection that can be as useful as homeowner’s insurance, if not even more so.
One thing is for sure, for this plan to work, you have to get it from a trustworthy company. The plan itself must also be designed well to fit a variety of situations and provide comprehensive coverage.
Therefore, take your time researching and comparing the available options. And be sure to read the fine print on every contract before making the final decision.