Let’s get right into it: a home warranty is a renewable home service plan that covers your home systems and appliances including your hot water heaters and HVAC systems in case breakdowns happen. Homeowners insurance policies usually cover catastrophes, so warranties are meant to help pay for things that break down from wear and tear, everyday use.
How Does It Work?
A home service plan is optional, but it is often a good idea to purchase, according to Raj Midha, general manager and senior vice president of American Home Shield, a warranty company. This policy will usually cost about $50 to $75 a month. That low price can pay off in a huge way.
According to Midha: “Let’s say your HVAC system stops working. In that case, a qualified, independent service contractor will be assigned to assess the problem. If it’s determined that the system is no longer working because of age or wear and tear, and the breakdown is covered under the terms of your service contract, the repair professional will make the repair, or if necessary, replace the appliance or system component for just the cost of your service call.”
Midha’s company covers the costs according to which plan you’ve chosen. He says: “A one-time service call costs either $75, $100, or $125 based on the amount you choose in advance when you become a member, and American Home Shield pays the remaining amount for the repair or replacement based on the plan that you have selected.”
In terms of what it doesn’t cover, he shared that: “In general, a home warranty does not cover events like fire, smoke, theft, fallen trees, or damage caused by weather, which are covered by home insurance.”
Who Needs It?
If you live in a new home, you might think that you don’t need a home warranty. However, Midha shares that it’s still a great investment for any homeowner. He said: “They are suitable for any type of customer, due to the wide range of options for customization and add-on coverage, but may be an especially wise decision for homeowners on a set budget, owners of older homes, or recent home buyers who opted to waive their inspection contingencies.”
He continued: “The protection of a home service plan can save you hundreds or even thousands of out-of-pocket dollars, as well as the headache of finding a trusted service contractor to make the repairs.”
Who Doesn’t Need It?
Of course, that doesn’t mean that absolutely everyone needs a home warranty. The main thing is that warranties are contingent upon whether the homeowner has been maintaining these items, as the warranties don’t cover damage due to an owner’s neglect.
Another downside is that if an item it damaged beyond repair, you might not get to choose the replacement. Of course, just like insurance, you’ll pay the premium regardless of whether you use the service or not.
How To Get It
While it is often advertised as a perk of buying a new home, you can still get a policy at any time. Midha shared: “Once you purchase a plan, you can start using your home warranty after the 30-day waiting period, which is an industry standard.”