Home Warranty & Home Insurance

Most homeowners understand the necessity of homeowner's insurance to protect the investment they've made in their home. In fact, most mortgage lenders require proof of home insurance coverage before they will issue home loans. However, homeowners are not as well informed about the importance and benefits of home warranties. A home warranty is a form of coverage that you can use to supplement your home insurance policy. Home warranties will protect you from the cost of repairs that your homeowner's policy doesn't cover. In other words, a home warranty picks up where your homeowner's insurance leaves off. Purchasing both forms of coverage is the best way to insulate yourself from costly repairs that might spring up in the future. In this post, we'll further clarify the difference between home insurance and home warranties and give you some helpful tips on finding a good warranty and making a claim.

What a Home Warranty Covers

Home warranties generally cover small repairs to the systems and appliances that were installed in your home when you bought it. A typical home warranty would cover things like plumbing, heating, major appliances, and air conditioning-all things that a standard home insurance policy would not cover. Specifically, your home warranty would cover repairs for malfunctioning major appliances like ovens, washers, dryers, and refrigerators. Ductwork, heating, the electrical system, and other systems fall under a home warranty's purview as well. For higher fees, you might be able to purchase a home warranty that covers smaller appliances like doorbells, ceiling fans, garbage disposals, garage door openers, and built-in microwaves. Remember that home warranties are not substitutes for a home insurance policy, they do not cover pre-existing structural or appliances problems, and they are not guarantees, by any means.

Home warranties are essentially service contracts that usually last one year and cover the repair or replacement of major home appliances and systems that malfunction due to normal wear and tear. Don't conflate home warranties with builder's warranties; home warranties cover pre-owned or existing homes, while builder's warranties come with new houses. A home warranty doesn't replace or overlap with your home insurance policy. The best way to understand the difference between the two is to think of the concept as a cause-and-effect relationship. For instance, if your water heater exploded and ruined one of the walls of your home, the home warranty would replace the water heater, while your homeowner's insurance would cover the cost of fixing the wall.

Tips on Home Warranties

The cost of a home warranty is usually $250-$600 per year. If something breaks, you would call your home warranty company, and they would then contact a local company to send out a technician. If the malfunction is covered under your warranty, you would only have to pay for the service visit, which will run you $25-$75. When you purchase a home warranty, remember that it is only as good as the company that issued it. You should research the integrity of the warranty company extensively before you purchase from them. If you are unsure how to do this, you could talk to your real estate agent for tips on which companies have the best track record and are the most financially stable. Every home warranty is vastly different, so before you sign anything, make sure you do the following:

• Make sure you know when the warranty begins and when it expires
• Read through the contract carefully to learn what is covered. Some contracts will have a list of items that are covered.
• Review the procedures for filing a claim. You don't want a warranty with a claims process that deters you from getting the repairs you need.

Filing a Claim

For the most part, filing a claim on your home warranty contract is a fairly simple, straightforward process. Most home warranties give homeowners a toll-free claims number to call in the event that anything breaks. The company will then verify your coverage and dispatch an independent contractor to your home. The contractor will assess the problem, replace or repair the item as necessary, and then charge you a service fee for the visit. The service fee is similar to a co-pay with health insurance or a deductible with auto insurance. Your home warranty company will pay for the remaining cost of the repair when the contractor bills them. Usually, home warranties do not limit the number of claims you can make. However, some home warranty contracts do limit the amount of money that they will spend on any one appliance or system. For instance, your contract might limit water heater repairs to $1,500. Consult your contract to find out what limits the company might impose on your coverage.