Understanding What a Home Warranty Is and What It Covers

A home warranty is a contract between the homeowner and an insurance company that guarantees the repair or replacement of certain appliances and systems in the home, such as the furnace, air conditioning unit, water heater, dishwasher, and washer and dryer. Home warranties are also referred to as appliance insurance or equipment breakdown insurance. - the cost of a home warranty policy typically ranges from $300 to $600 per year, depending on the size of the home and the number of appliances covered. But to understand what a home warranty is and what exactly it covers, read on for more valuable info!

Understanding What a Home Warranty Is and What It Covers
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What Is A Home Warranty?

In the most basic terms, a home warranty is a service contract that helps cover the costs of repairs or replacements for certain appliances and systems in your home. Home warranties are typically offered by insurance companies, and they can be an optional add-on to your homeowner’s insurance policy or a standalone purchase. The average home warranty cost will depend on a lot of factors, and while it is not required, it can be a valuable asset, particularly for first-time homeowners who may not have the savings to cover an unexpected repair bill. And even if you have the funds set aside to cover these types of repairs, a home warranty can save you the time and hassle of having to find and schedule a qualified technician.

Home Warranty vs Homeowners Insurance

While a home warranty and homeowners insurance both cover repairs or replacements, there are some key differences between the two. Homeowners insurance covers damages due to events that are out of your control, such as fires, theft, and weather damage. A home warranty, on the other hand, covers damages due to normal wear and tear of appliances and systems in the home. So, if your furnace breaks down due to old age, a home warranty would cover the repair or replacement costs.

What Does a Home Warranty Cover?

Now that we've clarified the difference between a home warranty and homeowners insurance, let's take a more in-depth look at what exactly a home warranty covers. As we mentioned before, a home warranty typically covers major appliances and systems in the home, such as the furnace, air conditioner, water heater, dishwasher, and washer and dryer. However, coverage varies from policy to policy, so it's important to read the fine print of your contract to see what is and isn't covered.

Repair And Replacement

For example, some home warranty companies will only cover the repair or replacement of an appliance or system if it breaks down due to normal wear and tear. If the appliance or system breaks down due to negligence on your part (such as not changing the furnace filter regularly), then the home warranty company may not cover the costs. Additionally, some home warranty policies exclude certain appliances and systems from coverage altogether, such as swimming pools and hot tubs.

Approved Service Providers

Another important thing to note is that those home warranty companies typically have a list of pre-approved service providers that they work with. So, if you need to file a claim, you'll have to choose from the list of approved service providers to get coverage. This is important to keep in mind because you may not be able to use your preferred repair company.

Per-Incident Limits

Finally, it's worth mentioning that home warranty coverage typically has a per-incident limit. This means that there is a maximum dollar amount that the home warranty company will pay out for each repair or replacement. Once you reach the per-incident limit, you'll be responsible for paying any additional costs out of pocket.

Tips For Choosing A Provider

Now that you have a better understanding of what a home warranty is and what it covers, you may be wondering how to choose a provider. There are a few things you'll want to keep in mind when shopping for a home warranty, such as:

  • The types of coverage offered
  • The cost of the policy
  • The deductible
  • The per-incident limit
  • The list of approved service providers
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Home warranties are a type of insurance that covers the repair or replacement of appliances and systems in the home. They are not required but can be a valuable asset. Homeowners insurance covers damages due to events that are out of your control, such as fires, theft, and weather damage, while a home warranty covers damages due to normal wear and tear of appliances and systems. It's important to read the fine print of your contract to see what is and isn't covered. By taking the time to research your options and understand what is and isn't covered, you can find a home warranty policy that meets your needs and budget.

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