How Does a Home Warranty Work? The Complete Guide

Imagine having to deal with a broken furnace in the dead of winter a week from moving into your new home?

It would be inconvenient, super stressful, and possibly expensive to fix. The beauty of a home warranty is that you wouldn’t have to worry about the expense and the fact that its market is worth $2.5 billion says a lot.

The question is, how does a home warranty work? Home warranties protect homeowners from the financial risk of maintaining their homes. However, it’s not quite the same thing with homeowners’ insurance, which is the most confusing part for most people.

To help you understand all the nitty-gritty details about home warranties, we bring you this comprehensive guide. It covers everything you may want to know about a home warranty, and why it may be a good idea to get one.

What Is a Home Warranty?

Basically, a home warranty is a service insurance policy for the major systems and appliances in your home.

Some of these systems and appliances include indoor plumbing, fridges, electrical systems, ovens, dryers, watching machines, HVAC systems, dishwashers, and water heaters. The warranty pays to fix and replace them if and when they break.

This warranty doesn’t cover things like windows, doors, or any other structural features of your home. Moreover, the warranty is only designed to cover items that are in working condition upon occupancy of the house but then fail later on. The home warranty contract is usually valid for a year, and it offers varying levels of coverage.

All home warranty providers offer different levels of coverage and pricing. Homeowners get to choose which level suits their home best. Some warranties only cover basic repairs, others cover major appliances, while others cover only the systems.

Typically, a warranty that covers basic repairs will be more expensive than one that covers replacements as well.

How Does a Home Warranty Work?

Most home warranties operate the same way. So when a system or appliance in your home breaks down, you notify the home warranty company. In turn, they contact a service provider they trust and ask them to come check it out.

The provider will come to your home and fix the issue or report that it can’t be fixed depending on its condition. You will have to pay a small service trade fee, which may cost anywhere between $75 and $100 and may be negotiable when signing up for the warranty plan. The warranty usually doesn’t reimburse out-of-pocket expenses, so avoid repairing it on your own.

How Do Home Warranties Differ From Manufacturer’s Warranties?

A lot of homeowners tend to feel that since manufacturer warranties cover their appliances, they have no need for a home warranty.

You see, a manufacturer’s warranty only covers a specific item for a specified period of time, after which it expires. Generally, these warranties offer repairs, servicing, and sometimes replacements for said items.

Most last an average of one year, after which you would need an extended warranty. The problem is, manufacturers warranties cover original items bought by original owners. This means that if these appliances are already installed in the home, you won’t be able to take advantage of the warranties provided.

Even if you’re the original buyer, an extended warranty will cost you and still expire after some time. Paying for several extended warranties for all your appliances will set you back more money. It’s relatively cheaper to pay a home warranty covering all appliances and possibly systems together.

How Do Home Warranties Differ From Homeowners Insurance Policies?

Homeowners insurance policies cover major and unexpected damages, like structural damages to the house due to flooding, and fires. It also covers other things like theft and accidents.

For example, if one of your water pipes burst and damaged the refrigerator motor in the process, your homeowner’s insurance would cover the costs.

However, if the refrigerator broke down on its own due to things like a malfunction or wear and tear, the home warranty would cover the costs. So, how does a home warranty work? It covers all your repairs and replacement issues immediately.

What Are the Benefits of a Home Warranty?

Appliances and home systems are bound to break down at one point, and it’s impossible to tell when that’s going to happen.

One of the most significant benefits of a home warranty is that it’s less expensive than the costs involved in repairing and replacing these appliances and systems. For a fixed annual price and a small service call fee, you can have any of these items repaired or replaced immediately.

Beyond that, it’s a super-fast and straightforward process. Once you request a service, the company will dispatch a professional technician to your home. As long as you find a reputable and professional home insurance company, you’ll have your appliance up and running in no time.

Even better, you will have access to a network of professional and established technicians. This will eliminate the process of searching for the best service providers. The insurance deductible you also have to pay will be upfront, and you will know exactly how much to pay when the technician comes over.

What Are the Downsides of a Home Warranty?

Most of the time, you’ll find that the downsides are with the insurance companies themselves, which is why it’s vital to find the right one. For instance, since repairs are always cheaper than replacements, you may find that a company insists on repairing while what you need is a replacement.

You may also disagree on the prices and value of the systems or appliances when the company wants to reduce the amount they spend on you.

Beyond that, you need to be extra careful with the fine print of the contract. They mostly come with many limitations and exclusions. They might catch you off guard when you need them the most.

Plus, you’ll have to prove that the appliance or system was working properly. If they can prove there was a pre-existing issue, they’ll not fix it. Finding a professional and reputable home warranty company, such as Select Home Warranty, is essential.

Everything You Need to Know About How Home Warranties Work

So, how does a home warranty work? This is a question most homeowners ask, although very few take the initiative to get one.

It may not seem necessary, but it’ll save you on those unexpected repairs and replacements in case you won’t have enough money to cover for them. You won’t have to wait until your next payday to get anything fixed or replaced as the company will do it immediately.

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