What is a Home Warranty?

The last time you purchased a home, your real estate agent may have negotiated for you to receive a home warranty from the seller at closing.  Perhaps you weren'teven aware that this took place or you glossed over it in the excitement of closing on the house. 

It is common for buyers to request that the seller provide them a one year warranty on the house, but like insurance policies, many times the policy or warranty is stuck in a drawer after closing and not pulled out until a problem occurs.  I would recommend that if you closed within the last year, you find your closing statement and see if there was a charge on it for a home warranty.  If so, you may have coverage that you weren't aware of.   If you are closing in the near future, make sure your agent negotiates for you to get this warranty.

Unlike your homeowner's insurance policy, a home warranty covers the costs of repairs or replacement of mechanical systems and appliances such as your air conditioner or dishwasher; it provides peace of mind when a problem occurs.   

WHAT IS A HOME WARRANTY ANYWAY?

A Home Warranty is a service contract to help cover repair and replacement costs of a home's mechanical systems and appliances that malfunction due to normal wear and tear during the coverage period. It is not a maintenance plan unless the warranty company provides that option. Items must be in proper working order when coverage begins. It is the homeowner's responsibility to complete, or have completed, by a licensed technician, routine maintenance, service and cleanings of all systems and appliances. By law, a Home Warranty cannot cover the costs to repair secondary damages as a result of appliance failure and is not a form of homeowner's insurance. Some warranty companies have a waiting period or exclude certain items for an initial period of time. Homeowners pay a small trade fee per service call for each claim. Trade fees vary between warranty companies; most warranty providers hire third-party contractors to perform jobs for set service fees. Some claims incur non-covered or out-of-pocket charges which must be clearly listed in the contract. It is extremely important to read the Limits of Liability in the brochure as they explain what is included and excluded from coverage. No plan is all-inclusive and while most providers cover many of the same items, each offers a unique service or product. The home warranty should not be used for emergencies and should be considered as a secondary form of financial assistance towards mechanical expenses incurred during homeownership. While it's not always a fast process, home warranties have proven to save homeowners thousands of dollars and serve as a great resource for homeowners in general.

HAVE YOUR HVAC SYSTEM THOROUGHLY INSPECTED.

Warranty Associations throughout the U.S. strongly urge home buyers to have a licensed HVAC technician thoroughly inspect (not just service) the heating & cooling systems prior to closing.  Many licensed state inspectors have a limited scope of inspection and cannot detect HVAC issues that would not be covered under a home warranty. Pre-existing leaks in the coils or cracks in the heat exchanger are not covered. Many times the inspection report is a direct indicator of a possible pre-existing condition that may need to be addressed before a warranty company will cover the HVAC system. Most warranty companies will more likely consider paying expensive HVAC claims if the homeowner performed enough due diligence to prove the issues were truly unknown at the time of the general inspection.

SPEND YOUR WARRANTY DOLLARS WISELY.

To determine the level of coverage needed, consider the appliance's age/condition and whether or not it may need to be simply repaired or fully replaced. Stick with reputable companies and compare lists of covered items to how much the policy pays out when it comes time to replace the largest, most expensive systems: HVAC, ductwork, water heater, garage door opener, refrigerator, pool, etc.