How Do Home Warranties Work?

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How Do Home Warranties Work?

A manufacturer’s warranty for an appliance guarantees that specific parts or labors are free or available for a lower price when the appliance breaks down within the coverage period. A home warranty, on the other hand, is similar to an insurance contract. You pay a premium that will protect you from having to pay for major home appliance repairs within a set period. But how do home warranties work, exactly?

Difference between Home Insurance and Home Warranties

A home insurance plan covers the damage to the home that occurs due to a covered disaster. For example, the home insurance plan may cover fire damage to the house, and if your house burns down your insurance provider pays for the repairs.

The home warranty covers specific systems of the house, often those that aren’t covered by the home insurance company. More notably, the home warranty covers the repairs of the major appliances. If the fire damages the fridge and the TV, then the home insurance plan may not cover the costs of the repairs or replacement of those appliances. But the home warranty will.

This is why a home warranty is not a substitute for home insurance. It’s a complementary precaution, so that if disaster strikes you’re covered for just about everything in your home that needs expensive repairs.

Difference between Manufacturer’s Warranties and Home Warranties

At the onset, it may seem unnecessary to get a home warranty when just about every new appliance you buy also comes with a warranty, right? But that’s not really the case.

You may find that the manufacturer’s warranty can be full of fine print conditions. The manufacturer may only pay for a fraction of the repair costs in the 3rd year of coverage, while in the 1st year it pays for the entire costs of repairs. The manufacturer may also only cover the cost of the repair parts, but not for the labor.

With the home warranty, usually such conditions may not apply at all. The home warranty provider may even send its own home technicians to your door to fix all covered appliances that need repairs. However, it all depends on the details of your home warranty coverage. For example, the home warranty may not cover a second refrigerator though the first one is covered. There may also be a small service fee for each repair.

What makes a home warranty much more convenient is that you don’t have different warranty contracts for different appliances. When an appliance breaks down, you normally have to hunt for its warranty card so you know which number to call and which conditions apply.

With a home warranty, you only have 1 number to call instead. That makes everything a lot simpler. You may also have the option to pay for individual extended warranties for each appliance, but it’s easier to get a home warranty for all your major appliances. You only pay for a single low premium.

What Does the Home Warranty Cover?

This all depends on the coverage plan you get. Typically, the coverage includes your central air conditioning and heating systems, your clothes washer and dryer, and specific kitchen appliances such as your fridge, oven, and dishwasher.

In some plans, the coverage can also extend for the home’s electrical system and plumbing system. Some plans even pay for roof repairs if your home leaks.

What Are the Conditions?

Again, this depends on the details included in your plans. But some conditions are very common in home warranty contracts. One typical condition is that the home warranty does not cover preexisting conditions. So you can’t buy a home warranty plan and then expect it to pay for your already broken down fridge.

Usually, the home warranty doesn’t cover the costs of normal maintenance procedure, such as the semiannual cleaning required for an air conditioner. You have to cover those costs yourself. You also must make sure that all required maintenance procedures are performed, or else the home warranty won’t pay for the costs.

In many plans, the home warranty won’t pay for damage if the appliance was improperly installed.

Additional Benefits for Home Sales

Home warranties are often transferable. This means that if you’re buying a house including the appliances, you may want to buy a house with home warranty so that the repairs of those appliances can be covered if they break down soon after the purchase is completed.

If you’re the home seller, it makes perfect sense to buy a home warranty. It increases the likelihood of a sale, and it increases the price of the home. Just make sure that you check the details of the plan. By knowing how home warranties work, you can be sure of coverage within the home warranty period.

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