For homeowners, having a protection plan in place to safeguard your most valuable asset is critical. You can do this by purchasing a homeowner’s insurance policy and a home warranty.
If you’ve bought your dream home and are wondering how to save on unexpected costs, a home warranty might be the perfect solution for you.
Although you’ve probably heard of homeowner’s insurance, you might be unfamiliar with home warranties, how they work, how they differ from homeowner’s insurance, and what the best home warranty companies will cover.
Read on to find the answers to these questions and more.
What is a Home Warranty?
In a nutshell, a home warranty is a service contract that covers the repair or replacement of your essential household appliances and installations. While this may sound similar to the way homeowner’s insurance works, they are two different things.
For one, homeowner’s insurance is mandatory when you finance your home. Homeowner’s insurance will cover any extensive structural damage to your property or possessions due to named perils like fire, flood, hail, and vandalism.
On the other hand, home warranties are optional, and they are designed to cover the maintenance and repair of your major appliances and mechanical home systems.
What Does it Cover?
While a home warranty’s coverage will depend on the home warranty plan and the provider, it will generally cover your home’s mechanical systems – such as your air conditioning, plumbing, heating, ductwork, electrical, etc. Home warranty appliance plans will also cover your major household appliances – like your dishwasher, oven, stove, doorbell, washer, dryer, refrigerator, etc.
What your plan covers will depend on whether you choose comprehensive coverage, appliance-only coverage, household system-only coverage, or a combination of the two.
Most home warranty providers will allow you to add add-ons for additional household appliances – these usually include spas, sump pumps, ice makers, and pools.
What Won’t it Cover?
When it comes to what a home warranty does not cover, providers generally will not provide coverage for appliances that have been purposely damaged, accidentally misused, or maintained improperly. Some home warranty providers will not cover the non-mechanical components of your home systems – such as knobs and handles.
You should also be aware that most home warranties will not cover “pre-existing” or “known” conditions and defects. Repairs or replacements will not usually be covered if issues or faults with your appliances or home systems were documented before your coverage began.
When purchasing a home warranty, read through your plan carefully to ensure that you know exactly which appliances and home systems are covered.
The Bottom Line
Suppose you’re concerned about being leveled large, unforeseeable expenses when your expensive household appliances and major home systems break down. In that case, a home warranty is a way to mitigate the impact on your finances.
For this reason, home warranties are particularly useful for new homeowners will little to no savings who want to preserve their investment. Paying a smaller amount monthly for coverage of your household appliances and installations means you won’t have to pay a large lump sum out of pocket if something goes wrong.
