Article by Chris Costi, Last update at June 23, 2019
Buying a house comes with many responsibilities and worries and most new homeowner will need to have some kind of insurance in place to protect them from unforeseen disasters. For those who have a mortgage, it is compulsory to take out house insurance for protection from natural disasters, fire and theft. This insurance can cover the contents of the home but it does not protect the homeowner from natural wear and tear of everyday appliances and systems that keep the home functional. This is where home warranty insurance plays an important role, but which one do you choose?
Do you need a home warranty?
If your home is brand new and all your appliances have just been fitted, you probably do not need warranty insurance. Your home systems will probably have a warranty from the contractor for a specified time period and your appliances will have warranty cover from the manufacturer. For those who are purchasing older homes with existing systems and appliances, getting coverage will help you keep the cost of repairs or replacements at an affordable monthly or yearly fee. This will protect you from unwelcome surprises if something happens further down the line.
The best option for your circumstances
Once you have decided to purchase a home warranty service it is advisable to find the one that fits your budget and needs. Picking the cheapest home warranty might not be the best one for you, do some research and you will probably find another company that offers value for money. A company with a good track record and favorable reviews by existing customers is probably a safe bet as you do not want to be stuck in a battle with the warranty company should you wish to claim.
The first considerations should be to find a warranty company that services your area. There are huge companies that cover all 50 states, but it might be a good idea to check out local companies as they might offer a more personalized service. The best way to compare the plans offered is to request quotes and download the terms and conditions that apply to each company. You will find that most companies in this field have caps on certain appliances and services which could be too low for your requirements.
What do you need to be covered?
Take the time to make a list of all the appliances you have in your home. The oldest and more likely to break down in the near future should be your priority. If you have been living in your home for a while, you can look through your owner’s manuals to determine the age of each appliance or system. If you are buying a new property you can ask your realtor to get you a detailed list of all existing items in the home. It may be that some of the appliances are new and still covered by a manufacturers’ warranty in which case you will not need to double insure.
Once you have determined which appliances and services you need to cover with a home warranty, you will have to make sure that the items have been properly maintained and serviced as some warranty companies could refuse to pay for repairs if they can prove that the appliance was not misused. At the time of commencement of a warranty all items covered must be in good working order and properly maintained as the warranty companies will not pay you for pre-existing conditions.
After you have decided which items you want to be covered and found the warranty companies that service your area, the best course of action is to look at sample contracts from each company so that you can compare the terms and conditions as well as the requirements. As an example, you might find a company that does not cover all the parts of a certain item or they have a low yearly cap which does not satisfy your criteria in the event of malfunctions in your home. This where you need to prioritize on which items you need to cover and at what price.
Exclusions and Limitations
All warranty companies will have some exclusions and caps on the amount they are prepared to pay on each item and also the total you can claim for the year your contract is in force. You will find there is a big difference in what each company offers. If you have very expensive appliances and the company offers you a ridiculous cap of $1,500 per year on appliances, obviously this is not the right contract for you. Some warranty companies could offer you a cash settlement for items they cannot repair and others will replace the appliance with one of a similar make. There is a lot to consider when you choose your warranty company and this will depend on your choices.
When it comes to limitations, some of the warranty companies simply have too many. This usually results in a cheaper premium which will not give you the cover you need. Overall limits are the norm with all warranty companies and they tend to have a dollar amount on the maximum you can claim per year. On average you can expect to pay $300 – $500 per year for a decent home warranty. You also have a choice of insuring just appliances or home services or the combination of both. If you insure just appliances you can expect to pay around $33 per month. How flexible the coverage is, and how quickly the company responds to claims, is another consideration.
The right balance
Ideally, you need to be able to find a warranty company that has a good balance between price, limitations, and exclusions. Major appliances and functioning systems in your home must be covered with reasonable limitations so that in your time of need you will have these items repaired or replaced by the warranty company you choose. Most warranty companies will give you a choice of cover that you can customize for your needs. Study this option carefully so that you can streamline what you want to be covered in your home. There are many options that even extend to the outside of your home with the cover offered for power and gas lines leading to your home. Obviously, the more you add the higher the cost, so make sure that you prioritize exactly what you need, for your home.
Service and Call out Fees
Each time you have a claim and a technician or contractor is sent to your home you will be liable to pay the service fee. Some warranty companies will let you choose how much this service fee is, but the lower the service fee, the higher the cost of your warranty. The price is usually $65 – $125, depending on the company and the area you are in. It is essential to know that most companies will only start paying out for claims between 30 – 90 days after commencement of the contract.
Accolades and reputation
The internet is a powerful medium if you want to find out what other people are saying about the prospective company you want to do business with. Before making your final decision on which warranty service to use, find some reviews from their customers so that you can see what their service is like. This is a guideline as to whether the company you choose has mostly positive or negative reviews. You can also find out if they are BBB accredited and if they have won awards for outstanding service in the past. The more you know about the company you will be working with, the better.
The final considerations
To summarize, finding the right warranty company for you, will depend on if their plans cover everything you want to be covered and at what cost. The exclusions and caps on different items is also very relevant and customer service is of the utmost importance. You will need a company that offers 24/7 communications so that you can reach them when you most need them. What are the service fees and how quickly can you expect a response with each claim is also important. Once you have answers to these questions you are well on your way to choosing the right household warranty for your requirements. As with all legal agreements it is strongly suggested that you read the fine print on the contract before you sign up with any warranty company.
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