It is not unusual for an appliance or home system to stop working. Like everything else, they go through normal wear and tear, and one day they simply give up. Most of us aren’t repair technicians, so our first instinct is to call someone who is. Calling a technician, however, incurs a significant repair cost.
Even in cases where the problem is minor, the cost can still be high. Other times, you might have to replace the whole appliance or home system, which can easily take your bill into the thousands. But you can choose not to pay for these repairs if you have a home warranty plan. This article will give you a detailed understanding of how a home warranty works.
How Does a Home Warranty Plan Work?
A home warranty is a service contract that covers repairs or replacements of certain home systems or appliances when they stop functioning due to normal wear and tear. You purchase a plan for one year and renew it annually if you choose. These warranties are offered by private companies.
The warranty plans can vary depending on your purchase plan: some cover only home systems such as plumbing, electrical, or HVAC, while others also cover appliances. You can also opt for a plan that combines these two. In addition, some companies offer add-ons such as water pumps or pool equipment.
You pay the fee (that can be either monthly or annual) and get the plan. If any of your appliances or home systems stop working because of normal wear and tear, you’re eligible to file a claim with the company.
Most often, a company assesses the claim and then selects and sends a technician from its network. However, some companies allow you to choose your technician. Once your company decides to send a technician, you will have to make a payment, service fee, often called a diagnostic fee, of $75 to $150, depending on the company and the plan.
Once the technician determines that the damage is covered under the plan, the company pays for the repair. In cases where the item cannot be repaired, the company will replace the system. This again depends on the contract coverage limit and other factors.
How is Home Warranty Different from Home Insurance?
Most homeowners often confuse a home warranty with home insurance, but they cover different things. As discussed above, a home warranty is generally optional; it covers repairs to your home appliances and equipment.
Home insurance is also optional (it is not required by law), but some mortgage lenders require it to protect their investment. Home insurance protects your property against unexpected calamities (known as covered perils), such as fire, vandalism, thunderstorms, smoke, hail, theft, and certain water damage.
If you buy a standard home insurance policy, it will usually provide three kinds of coverage.
Dwelling Coverage
This coverage will repair or rebuild your home if it is damaged by a covered peril, such as fire, lightning, or windstorm. Dwelling is not limited to the place where you live; it also covers other areas, such as the garage and the shed.
Personal Coverage
It’s not just your home that is destroyed when it is hit by a covered peril. Your valuable belongings can get stolen, a fire or a windstorm can damage your furniture, clothing, and electronics. In this case, personal coverage will protect you.
Liability Coverage
There are many occurrences that may take place on your property for which you can be held legally responsible. Someone can get injured on your property, or your pet can hurt someone. If you get caught in such circumstances, liability coverage will pay for the damages.
What is Covered under Home Warranty Plans
Most home warranty plans repair or replace your major appliances and home systems when they stop working, depending on the specific plan. The common repairs and replacements include heating and cooling systems, plumbing, kitchen appliances, electrical systems, and laundry appliances.
Some companies also allow you to purchase add-ons for items not included in a standard plan. This allows you to customize your plan depending on your needs. The following items are commonly covered under a home warranty.
Home System Covered Under Home Warranty Plans
Since home systems are built into houses and their main task is to keep the home comfortable and functional, they often break down, and your home warranty plan covers them.
Heating System
A home warranty typically covers several components of your heating system, including the furnace. If your furnace stops working during the winter, your warranty may cover the cost of repair or replacement, depending on your plan. Coverage may also apply if some rooms remain cold even while the heating system is running, if the system makes unusual banging or rattling noises, or if it shuts off before reaching the temperature set on the thermostat.
Cooling System
Just like heating systems, your air conditioner can stop cooling your home over time due to normal wear and tear. Your system might also experience weak airflow, fail to start, run continuously without cooling properly, or make unusual noises while operating.
Electrical and Plumbing System
Home warranty plans also cover electrical systems when certain outlets stop working, lights flicker throughout the house, light switches stop functioning, or circuit breakers trip repeatedly. Similarly, when water leaks from pipes inside the walls, water pressure drops, or faucets continue dripping even after being turned off, you can file a home warranty claim.
Appliances Covered Under Home Warranty Plans
Almost all your home appliances are covered under home warranty plans. For example, if your refrigerator stops cooling properly or your oven no longer heats as it should, you can usually file a claim for repair or replacement. Other commonly covered appliances include dishwashers, clothes dryers, built-in microwaves, garbage disposals, and range hoods or exhaust fans.
Like any household equipment, these appliances can wear out over time. When they fail due to normal wear and tear rather than accidental damage or misuse, your home warranty may cover the cost of repair or replacement, depending on your plan’s terms.
What Is Not Covered Under Home Warranty Plans
Your home warranty plan does not always pay for every type of damage or every repair or replacement. Sometimes the contract defines which items are covered and which are not, but certain situations are almost always excluded from coverage.
Damages that Are Pre-Existing or Caused by a Lack of Maintenance
If any of your appliances or home systems didn’t work before you signed the contract, your home warranty will not cover the damage. A home warranty also expects that you have taken reasonable care of your home; thus, if it is found that the system stopped working due to improper maintenance, your home warranty will not cover the repair or replacement.
Cosmetic Damage and Improper Installation
Your home warranty covers repairing or replacing items that stop working. It does not address claims about how your appliances or system look. For example, it will not pay for scratches, dents, rust, or faded finishes.
Sometimes you call a company to install an appliance, but the installation is not done properly, and the system does not function as it should. This kind of damage is usually not covered by your home warranty plan.
Even if your home system or appliance is covered by a home warranty plan, companies have coverage limits beyond which they may not contribute. For example, if the repair or replacement of a certain appliance costs more than the limit set by the company, you might have to pay the remaining amount out of your own pocket.
Home warranty plans come with their own benefits, but they also have limitations. At the end of the day, it all depends on how you want your home appliances and systems to be maintained. Before purchasing a plan, compare different providers, review what each plan covers, and pay close attention to the exclusions, coverage limits, and service fees. Taking the time to understand the contract can help you choose a plan that best fits your home and budget.
